Sale of furniture provided in rental property

Sale proceeds of contents to be included in CGT?

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A client has recently sold a rental property (let as fully-furnished). £3k of the total sale proceeds related to the sale of all furniture provided during the period of rental. Does the £3k form part of the CGT calculation or should it be deducted from total sale proceeds received? 

Replies (13)

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By 356B
17th Aug 2017 11:01

Furniture is not a chargeable item for CGT, so the sale is part of the income tax assessment.

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Replying to 356B:
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By kaff
17th Aug 2017 11:39

I don't think "furniture" per se is excluded from CG charge. But it's likely to be covered by the chattels exemption.

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The triggle is a distant cousin of the squonk (pictured)
By Triggle
17th Aug 2017 13:06

The furniture is plant and should have been capitalised in the rental business accounts.

However, you could not claim capital allowances on the furniture as they are being used in a dwelling house that was not a furnished holiday letting.

As they are plant then the furniture items would be deemed wasting assets under Section 44(c) of TCGA 1992.

As capital allowances could not be claimed on the furniture then they are not chargeable to CGT on disposal - unlike where capital allowances were, or could have been claimed, in, say, a trading business or furnished holiday letting.

The furniture is, therefore, a wasting asset and, as such, not chrgeable to capital gains.

The chattels exemption is not in point here as even if the disposal proceeds was greater than £6,000 for each separate piece of furniture there would still be no charge to CGT due to the furniture being wasting assets.

Therefore, the answer is that you exclude the furniture sale proceeds from your CGT calculation on the property.

If you should then ask if you could claim a capital loss on the furniture because it was sold for less than it cost, the answer is no. Just as there is no CGT on the disposal of a wasting asset you also cannot claim a loss on them.

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Replying to Triggle:
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By BayTree
17th Aug 2017 13:29

Thank you for your comprehensive reply...my one concern was that the previously claimed 10% W&T allowance might be viewed as a 'quasi-capital allowance' and negate the exemption from CGT.

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Replying to BayTree:
The triggle is a distant cousin of the squonk (pictured)
By Triggle
17th Aug 2017 15:59

I wouldn't think so. The capital allowances they are referring to will be those contained in the Capital Allowances Act.

I think that wear and tear allowances were contained in s308A,B and C of ITTOIA 2005 for income tax purposes.

Anyway, although the assets are wasting assets they still remain as chattels so, if push comes to shove, you can claim the chattels exemption instead.

You might want to address Possep's point as well.

It always seems the case that furniture has a decent value when CGT is being considered but always ends up valueless in a skip for IHT purposes.

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Replying to Triggle:
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By BayTree
17th Aug 2017 21:02

Again, thank you...I very much appreciate your time and trouble in responding to my post.

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By possep
17th Aug 2017 14:13

Is the sum of £3,000 a true value of the items sold or is the seller just trying to remove this sum from the charge to CGT?

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Replying to possep:
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By BayTree
17th Aug 2017 21:05

I understand that £3k was the agreed true value by both parties, but I will clarify the position. Thank you

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By Accountant A
18th Aug 2017 01:11

I don't have £3,000 worth of furniture in my house! Was the valuation arm's length? Second hand furniture (certainly of a type commonly provided in rental accommodation) isn't known for high values.

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Replying to Accountant A:
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By Mature Student
29th Aug 2017 16:59

Does your wife buy all your furniture and tell you after purchase how much it cost ;-)

For a typical 1 bed flat, £3k worth of second hand furniture may be a push, but in a top end Chelsea flat with high end furniture to match, definitely possible. Or a typical 4 bed fully furnished house, £3k could be a bargain especially if it includes white goods.

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By KatherineinWales
31st Dec 2021 17:17

BayTree wrote:

A client has recently sold a rental property (let as fully-furnished). £3k of the total sale proceeds related to the sale of all furniture provided during the period of rental. Does the £3k form part of the CGT calculation or should it be deducted from total sale proceeds received? 

Can I ask, if thr client were to have instead taken the furniture for their own use, having previously claimed it as expenses on their income from renting the property, would they need to declare that somewhere? And if so, where? Apologies for the lack of specificity, but I am asking on behalf of someone who is under the impression that they need to list and account for every item of furniture left over in a rental property when she sells it. The maximum value of the stuff new was probably around £2000, though if attempting to sell it now would probably if very lucky make about £300, if that, since everything has been used and is no longer new. The person is concerned that since she had income tax relief on buying it, if she now sells or uses anything she needs to declare it somewhere, she says on her 'property tax'. Is that correct? If so, can anyone provide more detail about what exactly is needed?

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Replying to KatherineinWales:
Stepurhan
By stepurhan
31st Dec 2021 21:44

This question is 4 years old. It is likely that most people opening it because you posted will realise that and close it again without seeing your post.

Far better to create a new question of your own.

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Replying to KatherineinWales:
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By More unearned luck
01st Jan 2022 13:59

The person's concern is misplaced. She should be concerned that she claimed tax relief on buying it, when no such relief was due. She should make a disclosure to HMRC via the let property campaign scheme as too little tax would have been paid in the year of purchase.

She may have correctly claimed relief on replacement items bought after 5/4/16, but there should have been no relief for the cost of the original item and no relief for pre 6/4/16 replacements as the wear and tear allowance existed.

The system is no relief for the (original) dining table (say) so no need to account for its removal from the business or sale. No relief is due on any loss on sale.

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