Mixed use investment flat C. G. T & relief

[kiran]

Can you please clarify:

1. Letting relief (max. £ 40,000) is allowed after the taper relief or before the taper relief?

e.g. Gain is 100,000, tapered gain is 70,0000 less 40,000 leaving 30,000 C G or is it calculated as : Gain 100,000 less 40,000 let relief = 60,000 x 70% taper leaving 42,000 Capital Gain?

2. This flat was purchased and let out from 1998 to 2004 and now since past 1.5 years it has been PPR. If it is sold now, final 3 years relief will be granted.
Is this on top of the 1.5 years of the owner occupancy or the owner's occupancy fall within the final 3 years, so only final 3 years would escape the gain? That is 3years / total ownership of 8.5 years.

Many thanks. Kiran

[Tax Accountant]

Can you please clarify:

1. Letting relief (max. £ 40,000) is allowed after the taper relief or before the taper relief?

e.g. Gain is 100,000, tapered gain is 70,0000 less 40,000 leaving 30,000 C G or is it calculated as : Gain 100,000 less 40,000 let relief = 60,000 x 70% taper leaving 42,000 Capital Gain?

2. This flat was purchased and let out from 1998 to 2004 and now since past 1.5 years it has been PPR. If it is sold now, final 3 years relief will be granted.
Is this on top of the 1.5 years of the owner occupancy or the owner's occupancy fall within the final 3 years, so only final 3 years would escape the gain? That is 3years / total ownership of 8.5 years.

Many thanks. Kiran

Hi Kiran (nice name):

(1) Lettings relief is deducted first before calculating the taper relief on the reduced figure. In fact, taper relief is always the last item before deducting the annual exempt amount. It is even after any losses of current year or losses brought forward from previous years. Therefore, in your calculation, it is applied to £60,000 and not to £100,000 as you would have liked.

(2) Only the final 3 years are exempted in total, INCLUDING the 1.5 years you have used as PPR. However, you will be entitled to lettings relief because you have used the property as your only or main residence and also let as residential accommodation at some time in your ownership.

Please also note that lettings relief of UPTO £40,000 (this is the maximum but actual amount could be lower) is available to each taxpayer against his/her share of the gains. Therefore, in the case of joint owners, eg a husband and wife, the relief could be upto a maximum of £80,000.

I hope this answers your queries.

Ramnik

[kiran]

Thank you Ramnik.

[Tax Accountant]

Thank you Ramnik.

You are welcome.

Ramnik