another CGT Thread

T

tosullivan

Registered User
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didn't want to jump in on the other thread as I have other questions here:

Bought an investment property early 2005, planning to sell it next year as I need the equity in it for another venture.

I will be filing my tax return end Oct this year for 2005. I have the costs associated with setting up the property on one side for 2005 & rental income on the other side. For 2005, the costs far outweighed the rental income so I will post a loss which will carry forward to 2006.

This loss combined with the costs for 2006 will also be greater than the rental income, but not as much as 2005, so I will carry that loss forward to 2007. More than likely I will post a loss for 2007, which is really no good to me as I'll not have the property after that.

What I want to try and do is have the costs almost equal the rental income for my tax return for 2007, so I'm trying to juggle the figures now, so going forward, they'll even up for 2007's tax return.

What looks like the best way to do is not to include the 1/8th of the capital allowances for each year which will probably balance out the 2007 year. Then if my 2007 tax returns for rental income v's expenses balanced out roughly, I could right the total capital expenses off against the CGT when I sell.

Is this possible?

Or, if by the year 2007, I was posting a loss, could I use this loss to add to my deductions for calculating my CGT?
 
Rental income has nothing to do with CGT. Like most people around here who are attempting DIY tax returns you really should get professional advice on this to avoid costly mistakes.
 
liteweight said:
What do you mean by loss? Is it the interest you pay on the mortgage?
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In my first year (2005), the expenses I occurred were high as they were (Interest on mortgage payments, management fee, solicitor, insurance premium, 12.5% per annum on cost of wear & tear of fittings & furniture, etc.).

Subtract thius from the rental income in that year and it was a negative figure so I carry it over to 2006.

2006 then has similar expenses except for the solicitor fees. Subtract those expenses from the rental income for 2006 and I post another loss, but not as much as 2005. This loss then carried over to 2007.

So add this lost to expenses incurred in 2007 and subtract from the rental income, it will probably again yeild a negative value, so that negative value is lost.

I was told that when selling an investment property that any expenses you incur when either buying or selling the house that you haven't claimed for in your tax returns can be used in offsetting the profit made on the property, thus reducing your CGT bill???
 
You can not set an loss on your rental income off against your CGT liability. You can only carry it forward to be offset againts future rental income, if any.
 
As I said - get independent professional advice before you make a costly mistake here.
 
on the CGT1 booklet it states:

Deductible expenditure
​
The amount of a chargeable gain or an allowable loss is determined by deducting any allowable
 expenditure from the consideration received for the disposal. The allowable expenditure may include:

 (a) the cost of acquisition of the asset and any incidental cost of acquisition such as agent’s commission and costs of transfer or conveyance

 (b) expenditure incurred for the purpose of enhancing the value of the asset which is reflected in the state of the asset at the time of disposal, and

 (c) the incidental costs of making the disposal, such as legal and advertising costs.
 The amounts under (a) or (b) above may be adjusted to take account of inflation (see paragraph 4 below).
 If any part of the consideration received, or the expenditure within (a), (b) or (c) above, is taken into
 account in computing any income or loss for the purposes of income tax or Corporation Tax on income, it
 must be excluded from the calculation of a chargeable gain or an allowable loss on the disposal.

 From a) above it looks like I can use the solicitor costs from the purchase for deductions on my CGT claim. However, it doesn't look like any losses I make in 2007 on my income tax return can't be used.​
 
jpd said:
You can not set an loss on your rental income off against your CGT liability. You can only carry it forward to be offset againts future rental income, if any.
Click to expand...

This is correct. You are basically confusing two different types of tax. The loss you talk of carrying forward is against income tax and cannot be offset against capital gains tax. I take it you want to maximise your loss for your 2007 return but once the property is sold, this is no longer possible, unless of course you have another property to offset it against AFAIK.
 
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Regarding (b) in TOSullivan's mail above, 'expenditure to enhance the value of a property', I am wondering what is allowable here. I have recently sold an apartment with the contents included in the price and this definitely enhanced the value of the property (or at least the price I got). I would imagine that fitting a burgular alarm and timber floors would be allowable but what else can be included ? What about kitchen white goods, wall lights, mirrors, bathroom fittings, etc. ? The Revenue guidelines rule out general maintenance such as painting but don't give a lot of other help.

Any suggestions ?

Trebledigit.
 
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