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What is the CGT rate on semi commercial property?

CGT rate on semi commercial property and whether the 60 day timeline to report/pay gain applies

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Hi everyone,

I have a colleague who has sold a semi-commercial property on 19/11/21. He is self-employed without having a registered company. The commercial area comprises the lower ground and ground floors, totalling 965 sqft. The residential area comprises the 1st, 2nd, and 3rd floors, totalling 841 sqft. By these measurements, 53% of the property is for commercial activity.

Which rate of Capital Gains Tax applies here, 10% or 18% for the lower tax band?

Does it need to be reported and any taxes paid within 60 days, or can it be reported and any taxes paid via the self-assessment tax return? I have read it needs to be reported within 60 days for residential property only and via the self-assessment for commercial property.

Also, is it normal practice to provide information on rental income from the property for the last 7 years while the capital gains tax is being reported? The accountant is asking for this.

Lastly this accountant is charging £2500 to assist my colleague in filing his capital gains report. What raised eyebrows, is that the accountant told him to create the capital gains tax account with HMRC, and then to fill in the forms and submit it. My question is, if the accountant is asking my colleague to do this, what is the accountant charging £2500 for?

Replies (24)

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By williams lester accountants
18th Jan 2022 10:50

AbdulHaque wrote:

Hi everyone,

My question is, if the accountant is asking my colleague to do this, what is the accountant charging £2500 for?

Surely that is between your colleague and his accountant.

Thanks (3)
Replying to williams lester accountants:
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By AbdulHaque
18th Jan 2022 12:09

What activities will you charge for in this scenario? I.e. if you directed your client to create the CGT account with HMRC and fill everything in with details the client already had?

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Replying to AbdulHaque:
By williams lester accountants
18th Jan 2022 15:55

Advice

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By Paul Crowley
18th Jan 2022 10:54

Who produced the calculations?
And am I right in thinking this is a once off, the friend was not a client in the past and will not be a client in the future?
Have you considered money laundering issues?

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Replying to Paul Crowley:
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By AbdulHaque
18th Jan 2022 11:06

The colleague did, as we have all the details of the transactions both past and present. My colleague is not my client nor a future client. No, we haven't considered money laundering issues as there was no money laundered, how is that relevant?

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Replying to AbdulHaque:
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By David Ex
18th Jan 2022 11:15

AbdulHaque wrote:

No, we haven't considered money laundering issues as there was no money laundered, how is that relevant?

https://www.gov.uk/guidance/money-laundering-regulations-who-needs-to-re...

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Replying to David Ex:
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By AbdulHaque
18th Jan 2022 11:50

Thanks, such regs apply to businesses like accountants. So I'm assuming if a private individual calculates their CGT and submits it, no registration is needed for money laundering supervision.

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paddle steamer
By DJKL
18th Jan 2022 11:11

Is sq ft a "just and reasonable" basis to apportion the consideration received when they have different uses and presumably different values per sq ft? e.g, in Edinburgh I might buy industrial space at say £150 per sq ft and I know some residential is now selling at £500 per sq ft.

How did buyer apportion price paid to calculate the SDLT/LBTT due?

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Replying to DJKL:
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By AbdulHaque
18th Jan 2022 11:44

Good point, SDLT amount is not known as the purchase was made in 1990.

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Replying to AbdulHaque:
paddle steamer
By DJKL
18th Jan 2022 11:59

The buyer when it was sold on 19/11/2021? Was there no correspondence on the point between the selling solicitor and the purchasing solicitor?

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Replying to DJKL:
paddle steamer
By DJKL
18th Jan 2022 12:04

Also consider history of use of the parts of the property from 1990 (purchase) to 2021 (sale), has it always been configured as you describe throughout that entire period?

What about works possibly enhancing or when splitting the property?

Any other factors, did the seller ever live in part of it etc?

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Replying to DJKL:
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By AbdulHaque
18th Jan 2022 12:12

Yes, it has always been used in the same configuration. There have been some works that have already been factored in to calculate the CGT. The seller did not live in it.

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Replying to DJKL:
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By AbdulHaque
18th Jan 2022 12:06

Sorry, I miss read your question. There must have been, I'm not sure, I'll tell my colleague to ask the accountant.

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Replying to AbdulHaque:
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By AbdulHaque
18th Jan 2022 13:40

The accountant allocated 50/50 between residential and commercial.

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By David Ex
18th Jan 2022 11:18

AbdulHaque wrote:

My question is, if the accountant is asking my colleague to do this, what is the accountant charging £2500 for?

Is there some reason that your colleague doesn’t want to speak to other accountants and ask them how much they would charge for the work?

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Replying to David Ex:
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By AbdulHaque
18th Jan 2022 11:52

My colleague is elderly and worried the 60 day time will be up if not sorted quickly. Hence my questions in the initial post.

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By Hugo Fair
18th Jan 2022 13:33

I'm sure someone can point you at the relevant legislation, but a cursory Google search unearthed https://www.icaew.com/insights/tax-news/2021/oct-2021/cgt-reporting-dead...
"Budget documents confirm that when mixed-use property is disposed of, the 60-day payment window will apply only to the residential element of the property gain."

So ascertaining the %age apportionment of the mixed usage property is going to be central to all aspects of calculating & reporting CGT.
Your colleague definitely needs professional guidance ... whether he is receiving the best advice and/or the best value is for him to determine (by talking to the accountant he has appointed and/or any others he is considering using).

Thanks (1)
Replying to Hugo Fair:
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By AbdulHaque
18th Jan 2022 13:49

The accountant just provided further info specifying what the CGT is on the residential amount, which is due within 60 days. They also provided an estimated CGT on the commercial amount, which is due Jan 31st 23. The timelines are correct however the CGT amounts are not. This is because there is actually a share, the colleague and his partner both own 50% of it. And the residential CGT that was calculated for both of them by the accountant was the same. How can this be when they both have different salaries? Also, the estimated commercial CGT amount was very similar to the residential amount, only a difference of approx £500, when the property was sold for approx £1.3 million. Surely the difference should be greater as the CGT rates have a difference of 8% between residential and commercial property? I have since asked the accountant to provide a breakdown of how they arrived at the CGT amounts.

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Replying to AbdulHaque:
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By Hugo Fair
18th Jan 2022 15:17

Sorry, but you've just lost my interest. As I said earlier, "Your colleague definitely needs professional guidance ... by talking to the accountant he has appointed and/or any others he is considering using."

You can't ask a bunch of strangers to second-guess the reasoning/calculations of the appointed accountant. You aren't even the client - plus we don't know all the base facts (and wouldn't comment on another professional anyway).

The best thing you can do for your colleague is to encourage them to ask these questions of the appointed accountant OR appoint a different one. At the moment you are not helping by raising unquantified concerns about perceived issues.

Thanks (1)
Replying to Hugo Fair:
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By AbdulHaque
18th Jan 2022 15:28

I just spoke to the accountant, everything was clarified, I won't go into the details here. The only mistake was assuming the clients' salaries, which is a quick fix before submitting.

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Replying to AbdulHaque:
paddle steamer
By DJKL
18th Jan 2022 15:21

Ask yourself if a 50:50 split looks reasonable?

As a starting position what rent received each year re the commercial space and what does that imply re yield if sold as an investment property for £650k?

Also ask why on earth sold as an unum quid, generally you get best price splitting properties into parts, for instance if there are 100 people with the appetite to buy a mixed property there are likely 500 willing to buy the commercial, just as commercial, and 5,000 willing the residential (made up figures but the point stands), achieving the highest price means looking at how you increase the number of potential buyers.

Now sometimes you sell as one if say ownership of all gives greater development freedom/scope, but not always.

It seems to me either your friend took next to no good advice re selling (should have come to someone like us, we live and breathe commercial space) or advice was taken and there is a lot more data.

Now I obviously do not know where and do not know comparative sq ft pricing commercial space (depends what type) and residential, but generally residential is worth more per sq ft (why so many commercial spaces get converted to residential) and of course the local DV will have local market knowledge.

I am more than skeptical re this convenient 50:50 split, too pat, too convenient.

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Replying to DJKL:
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By AbdulHaque
18th Jan 2022 15:32

I appreciate working out the ratio is complex but we have decided to accept the accountant's estimated ratio of 50:50. The client needed the fund quick, so we didn't really explore other options to increase the profit.

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Replying to AbdulHaque:
paddle steamer
By DJKL
18th Jan 2022 15:38

Well as long as the DV if referred also does, but if referred to him/her I would not hold my breath. I would also be careful re white box declarations re estimates inherent within the CGT calcs.

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By AbdulHaque
18th Jan 2022 15:34

We've got all the answers we needed, thanks to those that actually helped here.

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