Selling a property at a loss. Does HMRC still require a tax return

Selling a property at a loss. Does HMRC still...

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A client of mine is selling a buy to let property at a loss and wondered if there is still a requirement to complete a tax return

They do not have any other properties so unlikely to utilise the loss in future.

 

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By Matrix
29th Apr 2015 07:16

Hi Jim

Wouldn't the client already be in self-assessment due to the rental income?

Wouldn't you want to claim the capital loss if they are completing one anyway?

Also the client must have overpaid for the property since prices have risen, surprised a loss is possible.

 

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Replying to Southwestbeancounter:
paddle steamer
By DJKL
29th Apr 2015 12:17

Market prices- off topic really

Matrix wrote:

Wouldn't the client already be in self-assessment due to the rental income?

Wouldn't you want to claim the capital loss if they are completing one anyway?

Also the client must have overpaid for the property since prices have risen, surprised a loss is possible.

 

If you take previous market peak as say September 2007 there are, I believe, still some areas within the UK where prices have yet to creep back ahead , certainly when frictional costs are taken into account. 

There are also some developments, even here in Edinburgh, whose pricing in 2007 was to a degree predicated on the other developments that were intended adjacent, where these never occurred, and the adjacent site is still an area of scrub awaiting construction, I expect it is possible to still have a loss. I am thinking here about Western Harbour/ North Edinburgh.

So whilst on a city wide basis Edinburgh pricing  appears to again be at an all time high I suspect there are particular developments where that is not the case.

In addition, given the number of developers that went to the wall there are limited purchasers for these gap sites so the 24,000 unit North Edinburgh build programme is now years behind schedule. It is only now that smaller development companies like us, reliant on bank funding (who could not go to the stockmarket to repair our balance sheets), are being invited back across the thresholds of the banks to enable developments to be started. If all the politicians really wanted to build 200,000-300,000 units a year they might have thought to make loan funding to private developers a priority and we could have been building units for the last 7 years- getting planning has not been the issue (except funding professional fees etc) it has been getting the funding to do the development that has been the issue.

Anyway, in summary it is not impossible to have a capital loss, especially re properties on new development sites, but it is getting to be less the norm.

 

 

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Replying to Southwestbeancounter:
By Bungo
29th Apr 2015 12:56

Overpaid?

Matrix wrote:

Also the client must have overpaid for the property since prices have risen, surprised a loss is possible.

 

I agreed the purchase of my personal property in SE England in December 2007 and if I sold today I would make a big loss particularly after factoring in the substantial capital improvements I made. I have never considered that I over paid though, I spent a lot of time on research and I paid the price that was suitable at the time.

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By Phil Rees
29th Apr 2015 10:49

Unless it's a connected party transaction which would complicate the issue.

 

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By Harrison88
29th Apr 2015 11:51

Future or now?

Do you mean "will they need to complete a tax return after closing the rental business?" if so, that's dependant on what other income they have.

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By nick farrow
29th Apr 2015 12:02

proceeds more than 4 time annual exemption

I thought if the proceeds were more than 4 times the AE then cgt pages should be completed

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By Justin Bryant
29th Apr 2015 12:44

That's not quite right
See s3A(1)(b) TCGA 1992 and s3A(3) TCGA 1992 and the link below re the 4 x AE reporting limit:
https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

Thus, if it's sold at a loss you should report it to claim the losses and there is no obligation to report it even if the proceeds exceeded £44k.

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By Peter Upton
01st Dec 2023 16:23

I am in the position of renting my current home but sold my only owned property (owned with a buy-to-let mortgage) at a loss this year. I'd like to know how I report this and if I need to pay tax on the sum received, pay no tax or am eligible for a rebate.

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Replying to Peter Upton:
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By FactChecker
01st Dec 2023 18:41

As is so often the case ... not nearly enough info provided to give even general answers to the specific questions.

It's hard to see the relevance of "I am in the position of renting my current home" .. in the context of selling a BTL property (in which presumably you weren't living).
And "at a loss" is a little vague ... do you mean sold for less than you paid for it, or merely that you've 'made a loss' overall during the period of ownership (and if the latter in terms of asset values or with income/expenses in the mix)?

But one generic clue ... except in very rare circumstances (unlikely to be applicable in this scenario), any tax *rebate* can only be considered where *that* particular tax has already been paid by you - not just some other tax you may have paid.

Time to appoint an accountant to advise you ...

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