surrendering a protected tenancy

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    surrendering a protected tenancy

    Dear Forum, I have reached a settlement figure with my LL to give up my regulated tenancy for the sum of approx 100K
    I would like to know if I am liable to pay tax on this amount to the HMRC. If the answer is yes! would the percentage of tax owing be the same should the figure be considerably higher?

    #2
    You're selling something with no direct corresponding cost, so I think it's essentially income and taxable as such.
    That doesn't seem particularly fair in this case, but I don't see how you can avoid it.

    There are a number of practical consequences to this - you'll have to complete a self assessment tax return some time between April 6 2016 and the end of January 2017 (if you do this before 5th April 2016)
    You don't have to pay the extra tax until 31st January 2017.
    You will probably pay a high proportion of the tax at the higher rate of 40%.
    If your existing income PLUS the income for the transaction exceeds £150k, you will lose your tax allowance and pay 45% tax on the amount over £150k.

    It would be worth talking to an accountant (they'll usually give you a free meeting to discuss the situation to quote for your business) and it might be worth paying a couple of hundred quid to get the tax return done if you don't normally complete one.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Or, could be argued, a capital gain on your principle private residence so therefore not liable for tax: Dunno, hopefully someone cleverer along who knows - or ask HMRC (give it a week)..
      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

      Comment


        #4
        I would guess if anything, this is a capital gain. If so, there would be exemptions that would apply. Personally I would seek advice from a property accountant to see if there is any legal ways of minimizing any payments.

        Also, it could be deemed as a gift - people don't pay tax on gifts. Maybe the person giving the money is responsible as he is giving away his assets.

        Comment


          #5
          If your regulated tenancy has been your only private residence , you may be treated like owner occupiers and be exempt for any capital gains for the period you lived in the property.

          You should contact HMRC and ask for confirmation on their tax rules before your sign any termination document and checked by your solicitor.

          Comment


            #6
            PPR isn't applicable even if there is a capital gain - which would need the right being sold to be some kind of asset (which I guess you could try and argue).
            If the landlord had ever lived in the property they could claim PPR, so it can't be available to anyone else at the same time.

            Because the right isn't transferrable, it's only available to the tenant (and possibly a spouse) I don't think it can be an asset, but I'm at the limit of my knowledge here.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              This is a serious amount of money. I would get a solicitor for the legal side and an accountant for the tax side.

              Comment


                #8
                I have spoken to HMRC on Friday who informed me their is no liability for CGT in our case.
                But we have had conflicting opinion from a reputable tax charity organisation who are adamant I have a CGT liability based on my circumstances as a tenant being paid off a large amount of money to give up my tenancy.
                Obviously I am happy to go along with HMRC advice.

                Comment


                  #9
                  Get the HMRC advice in writing is all I can say.

                  Comment


                    #10
                    What did HMRC say about income tax?
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment


                      #11
                      This is a capital receipt and subject to CGT.

                      However, if it has always been your main residence, it is exempt.

                      Comment


                        #12
                        I bow to your greater knowledge.

                        Out of curiosity, on what basis is it a capital transaction?
                        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                        Comment


                          #13
                          Originally posted by jpkeates View Post
                          Out of curiosity, on what basis is it a capital transaction?
                          The disposal of the lease/right to occupy the property.

                          Comment


                            #14
                            HMRC have informed us there is no liability for CGT in our circumstances.

                            Comment


                              #15
                              And what about income tax?

                              Comment

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