When do you need to report capital gains on a sale of property?


T

Tim Woodall

According to the HMRC website, you don't declare the sale of your main
home on your tax return (because there's no tax to pay nor losses to
claim)

If you don't normally complete a tax return then you don't need to
declare a sale if you have no tax to pay.

If you normally complete a Self Assessment tax return (I do) then you
need to complete the capital gains tax page if your chargable gains
before deducting losses are more than the annual exempt amount (10900)
or
if the total amount you received from selling or disposing of assets is
more than 43600 (for 2013-2014)

What happens if you sell a property that was your main home but doesn't
qualify for 100% PPR relief.

Example:

Property sells for 200000. Originally bought for 100000 with 90% PPR

The "taxable proportion" of the asset sale is 20000 (which is less than
43000) and the taxable gain is 10000 (which is less than 10900)

Assuming no other gains or losses, would this still need to be declared?

I don't see why it would be based on the sale price of 200000 (greater
than 43600) when if PPR is 100% then you don't have to declare it but
I'm likely to be in this situation in the 2014-15 tax year so I'd like
to know now if I'm going to have one more headache to deal with on my
next tax return.

Also, assuming that I do have to declare it, would the numbers as given
above be sufficient - or would I have to go through and dig out things
like solicitors fees etc when it's not going to affect the amount of tax
due?

(I had thought that there was the last three years of ownership counted
to PPR but I've discovered that that's been shortened to 18 months for
this tax year.)

Tim.
 
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D

David Woolley

If you don't normally complete a tax return then you don't need to
declare a sale if you have no tax to pay.
I'm not sure that is true. I think that you may need to fill one in
based on your total disposals, even if you don't normally fill one in.
However, generally for these questions, I've heard that HMRC are quite
good at answering all the questions here, if asked directly.
The "taxable proportion" of the asset sale is 20000 (which is less than
43000) and the taxable gain is 10000 (which is less than 10900)

Assuming no other gains or losses, would this still need to be declared?
I think the purpose of the rule is ensure that transactions don't get
missed because the tax payer used an incorrect basis for determining the
capital gains. As such, I don't think there is any harm in submitting
return with a note explaining that you weren't clear about whether it
counted towards the limit, but it might be easier to just ask HMRC first.

Also, assuming that I do have to declare it, would the numbers as given
above be sufficient - or would I have to go through and dig out things
like solicitors fees etc when it's not going to affect the amount of tax
due?
The expenses will act in your favour, so I don't imagine that HMRC will
chase you if you exclude them, and add a note to say that you did that.
 
R

Robin

If you normally complete a Self Assessment tax return (I do) then you
need to complete the capital gains tax page if your chargable gains
before deducting losses are more than the annual exempt amount (10900)
I was asked that some considerable time ago. And gave up trying to
understand the SA guidance on CGT and replied that my remaining life was
*far* too short.

But FWIW http://www.hmrc.gov.uk/manuals/cgmanual/cg64206.htm reckons "if
partial relief is available, the taxpayer should provide the address of
the property sold with a computation of the gain or loss". I find that
hard to reconcile with the general guidanxce given the PPR "relief"
works in law by reducing the amount which is a "chargeable gain" and as
you record HMRC say you only need to make a return if your *chargeable*
gains exceed the exempt amount. It may be the manual is meant to apply
only if there is a requirement to makje a return.

It doesn't help that the SA108 has specific boxes for some reliefs but
leaves PPR to be dealt with by way of a note in "Any other information".

All in all I'd despair if I cared!
 
T

Tim Woodall

I was asked that some considerable time ago. And gave up trying to
understand the SA guidance on CGT and replied that my remaining life was
*far* too short.

But FWIW http://www.hmrc.gov.uk/manuals/cgmanual/cg64206.htm reckons "if
partial relief is available, the taxpayer should provide the address of
the property sold with a computation of the gain or loss". I find that
hard to reconcile with the general guidanxce given the PPR "relief"
works in law by reducing the amount which is a "chargeable gain" and as
you record HMRC say you only need to make a return if your *chargeable*
gains exceed the exempt amount. It may be the manual is meant to apply
only if there is a requirement to makje a return.

It doesn't help that the SA108 has specific boxes for some reliefs but
leaves PPR to be dealt with by way of a note in "Any other information".

All in all I'd despair if I cared!
This is why I'm hoping I don't need to include it at all. Invariably I
misread or misunderstand something and put the wrong number somewhere.
Usually I can detect the error when the taxman's calculation of the tax
refund (usually a refund) is different to mine.

For example, IIRC, on the same page of the tax return you put pension
contributions plus the basic rate tax reclaimed by the pension fund
while charitable donations are the amount you pay to the charity and
don't include the tax relief.

One or other of them (I don't remember which and I can't be bothered to
dig out last years tax return to check) doesn't even say which way the
number should be put so it's easy to assume that it's the same way as
the other number on the same page which does say which way to include
it.

Tim.
 
R

Robin

This is why I'm hoping I don't need to include it at all. Invariably I
misread or misunderstand something and put the wrong number somewhere.
Usually I can detect the error when the taxman's calculation of the
tax refund (usually a refund) is different to mine.
Yes but FWIW in this case I think you have a low-effort, fail-safe
option. You could fill in the CG pages and use the white space to
explain you are not bothering with deductions for fees etc. So long as
you check the the total gains don't exceed the exempt amount you can't
end up in a hole-in-foot/wallet situtation.
 
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C

Cliff Frisby

David said:
I'm not sure that is true. I think that you may need to fill one in
based on your total disposals, even if you don't normally fill one in.
However, generally for these questions, I've heard that HMRC are quite
good at answering all the questions here, if asked directly.
I'm no accountant, and no lawyer, but to add balance, I will say that I
think what he said *is* true (unless the law has changed in the last 10
years or so).

If you're not under a Notice to File, then you only need to proactively
stick your hand up if you have actually *underpaid* Income Tax, or
*underpaid* CGT. (You have to treat them separately though -- no offsetting
overpaid Income Tax against underpaid CGT in reaching that decision.)

If you *are* under a Notice to File, then you answer the questions in the
Tax Return!

On the OP's specific question about whether he can applying his PPR relief
*before* comparing result to the current magic figure of 43600 (it's always
4x CGT allowance isn't it?), I think the answer is no -- i.e. you have to
compare the full sale proceeds against the 43600 and show PPR claim as part
of the figures in the Return.

Both these questions were relevant to me about 10 years ago when my partner
and I sold a jointly owned house which was not fully covered by PPR. The
sale proceeds (or even half of them) were above the '4xThreshold' figure of
the day. I was getting a Notice to File every year for unrelated (non-CG)
reasons, so had to fill in the CG pages, even though there was no CGT to
pay. In contrast, my partner was not subject to any Notice to File, and
therefore, despite the fact that her answers and calculations would have
been absolutely identical, there was no obligation for her to approach the
Revenue about it, according to my reading of the law, so she didn't bother.

<snip>
 

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