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Chargeable gain question

Require confirmation of a chargeable gain calculation

Hello,

A client of mine had a property that was tied to his Ltd business (he rented this property to a private individual) - he sold the property in Feb 2018 for £142K and originally bought it in Dec 2010 for £130K.

Looking at the HMRC indexation Allowance charts, the Dec 2010 inflation index is 0.218 - so with my calcualtions (130,000 x 0.218 = £28,340) am I correct in concluding that he does not have to pay any CT on the sale of this property, as the gain is less than the orginal purchase price (taking inflation into account)?

 

Many thanks - J.

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08th Dec 2018 16:17

What do you mean by "a property that was tied to his Ltd business "? What was the legal ownership?

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08th Dec 2018 16:28

No. If it’s his property then he can’t claim indexation even if the rental agent was his company. It needs to go on his SA CG pages.

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08th Dec 2018 17:26

"Tied to" ?

Like A, I'm wondering what that means.

Never mind how he fastened this property to the company, who owned it ?

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08th Dec 2018 18:31

By tied to, I mean it was his property, but was not linked to his general business activities (he is a retired builder); perhaps 'tied-in' or connected to, might have been a better expression!
He hired a local letting agent to manage the lettings.

Thanks for the answer Tim.

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to Mortified
08th Dec 2018 18:56

If it was owned by him as an individual, indexation relief does not apply. Watch out for HMRC saying that as he is/was a builder, the profit is liable to income tax.

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to Mortified
08th Dec 2018 20:33

Mortified wrote:

By tied to, I mean it was his property, but was not linked to his general business activities (he is a retired builder); perhaps 'tied-in' or connected to, might have been a better expression!

A better expression might have been "the property belongs to him personally" or "the property belongs to the company", whichever it is.

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