CGT on letting property

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A client of mine was told his conveyancing solicitor, last June, that because he has owned a letting property, for 18 years, he doesn't need to report the gain and CGT is not due. I've brought myself up to date with CGT and cannot find any ruling on this. My client said to me now that there isn't a gain because he had to pay the mortgage off. I've told him that HMRC will find out the gain from the Land Registry or Right move and that he stands to pay double the CGT for avoidance and that he is currently facing a £300 penalty for not reporting and paying the tax under the 60 day rule. Please can you confirm that I am right in my findings?

Replies (16)

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By ireallyshouldknowthisbut
19th Jan 2024 15:04

Unless this is a property they have lived in for 18 years as their main home, CGT is likely to arise.

If this is not your area, then don't get involved, sub it out in Feb.

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By johngroganjga
19th Jan 2024 15:30

You also need to explain to your client why the matter of him paying off a mortgage has no bearing of any kind whatever on the CGT calculation.

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By Kosher
19th Jan 2024 15:55

Many thanks for both answers

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By Ruddles
19th Jan 2024 16:06

If he has the solicitor's 'advice' in writing, he might want to think about suing them for any penalties and interest.

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Replying to Ruddles:
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By rmillaree
19th Jan 2024 16:30

To be sure it wont be in writing - i would be slightly dubious it was ever said if i am being honest.

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Replying to rmillaree:
RLI
By lionofludesch
19th Jan 2024 16:47

[chuckle]

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Replying to Ruddles:
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By Tax Dragon
19th Jan 2024 21:03

Ruddles wrote:

If he has the solicitor's 'advice' in writing, he might want to think about suing them for any penalties and interest.

Wait... is that free legal advice being given in writing?

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By OldParkAcct
19th Jan 2024 16:54

A CG return is only due if there is a CGT liability.
Just because a sale has taken place does not mean a return is automatically required.
Whether there is a liability or not the sale needs recording on the self assessment return.
Ask for the relevant details, include the on the SA return and then decide if a late CG return is due.

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Replying to OldParkAcct:
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By Kosher
19th Jan 2024 19:59

They had packed in their other business, holiday flats, and had put in change of use to private house. They had sent in books for the final five months for holiday flats. So I looked at Zoopla, to get a value of rented property, to advise them of any possible tax and found out it had been sold in June 23, so I have worked out the CGT with estimates for estate agent's and solicitor's fees. Just got to find out if solicitors put anything in writing.

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By FactChecker
19th Jan 2024 18:35

My main conclusion?

If your client is going to take tax advice from a conveyancing solicitor, then you need to make him aware that ... either in future he should inform you there & then of any such advice (so you can disabuse him if necessary before it gets complicated/expensive) OR wave the red flag at him.

Of course, no idea if he has accurately repeated what the solicitor supposedly said - but it is absolute rubbish as it stands.

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By Tax Dragon
19th Jan 2024 21:12

"I've brought myself up to date with CGT"

That you did so was my suggestion to you on 6th December 2023. For the avoidance of doubt, I accept no liability for the consequences.

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By Yossarian
20th Jan 2024 15:41

I think he may be relying on that well known ruling 'there is no tax of any sort to pay on a rental property as long as HMRC don't find out about it' (Dave From Down the Pub v Regina, 1983)

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Replying to Yossarian:
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By FactChecker
20th Jan 2024 15:52

It's not just Dave ... there's the well known case of Boris vs Everyone:
'First, they gotta catch you; and then
you just deny, deny, deny (and 'lose' any evidence)'

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Replying to FactChecker:
RLI
By lionofludesch
20th Jan 2024 16:02

I suppose we should be thankful that Boris stopped short of insurrection.

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By Kosher
24th Jan 2024 10:44

They just got confused with what the solicitor said. They phoned the solicitor and he told them that CGT was outside his scope. The clients now know they have the tax to pay but are hoping, if I put on the form that they were unaware of the 60 day rule, that HMRC will waive the penalty. There is more chance of finding fairies at the bottom of your garden than HMRC waiving a penalty.

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By Kosher
24th Jan 2024 10:44

They just got confused with what the solicitor said. They phoned the solicitor and he told them that CGT was outside his scope. The clients now know they have the tax to pay but are hoping, if I put on the form that they were unaware of the 60 day rule, that HMRC will waive the penalty. There is more chance of finding fairies at the bottom of your garden than HMRC waiving a penalty.

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