Self Assessment: CGT

[UnclePhilip]

I've just completed our self assessment returns, using Tax Calc software, but before I submit them I'd be grateful for some advice, please.

I've completed the CGT section on the sale of an investment property, splitting all costs and enhancement reliefs 50/50 with my wife. Is there a box somewhere where I can put in an explanatory note? Without knowing the background, it's not easy to understand the figures. We bought a property, renovated it and ended up with two semi-detached dwellings. We sold one in 2019-20 and retained one, so apportioned 50% of costs as CGT relief on the first disposal.

I'm quite comfortable with the figures, and on one hand could just submit and be prepared for questions. On the other hand, an explanatory note might make matters clear and lessen the chances of enquiries.

Thanks,

Uncle

[dealtn]

I've just completed our self assessment returns, using Tax Calc software, but before I submit them I'd be grateful for some advice, please.

I've completed the CGT section on the sale of an investment property, splitting all costs and enhancement reliefs 50/50 with my wife. Is there a box somewhere where I can put in an explanatory note? Without knowing the background, it's not easy to understand the figures. We bought a property, renovated it and ended up with two semi-detached dwellings. We sold one in 2019-20 and retained one, so apportioned 50% of costs as CGT relief on the first disposal.

I'm quite comfortable with the figures, and on one hand could just submit and be prepared for questions. On the other hand, an explanatory note might make matters clear and lessen the chances of enquiries.

Thanks,

Uncle

There are addition information pages for online submission - I am unaware of what Tax Calc software is or does, sorry if that's not useful.

Or if it is a paper based return you can simply add the information as an attached sheet, or cover letter.

[Howard]

I've just completed our self assessment returns, using Tax Calc software, but before I submit them I'd be grateful for some advice, please.

I've completed the CGT section on the sale of an investment property, splitting all costs and enhancement reliefs 50/50 with my wife. Is there a box somewhere where I can put in an explanatory note? Without knowing the background, it's not easy to understand the figures. We bought a property, renovated it and ended up with two semi-detached dwellings. We sold one in 2019-20 and retained one, so apportioned 50% of costs as CGT relief on the first disposal.

I'm quite comfortable with the figures, and on one hand could just submit and be prepared for questions. On the other hand, an explanatory note might make matters clear and lessen the chances of enquiries.

Thanks,

Uncle

I use the HMRC standard software to submit a tax return every year. Through the process there are several opportunities to add notes. And from memory, at the end of the process, just before the opportunity to submit the return, there is a question something like: "Do you want to add any notes or explanations to your return?" Occasionally, over the years, I have added a very brief note to explain a figure I have submitted.

Over the years, I have also written some brief letters to HMRC on behalf of Mrs H or myself. (A couple were my final calculations on estates I handled as an executor). They have generally ended with my summing up of why I have submitted some information and my assumption that this is correct. From memory I've never received a reply, but the "system" accepted the information and no further questions were asked.

I know a couple of senior tax inspectors, now retired. They were pretty sensible! A note from someone who is trying to get the right return will be treated positively if the figures are roughly correct. They weren't bothered about a few quid. It's the people who are trying to cheat the system that the tax people enjoy pursuing ...... and they can then be very persistent.

So, if it were me, I'd personally add a note of explanation. But keep it brief.

regards

Howard

[scrumpyjack]

I use Taxcalc. There is a facility on the capital gains screen - asset details to enter additional information. It puts this in box 54 of page 3 of the CG summary.
(Switch to 'SimpleStep' mode, rather than HMRC forms mode)

[bluedonkey]

You can attach a PDF showing your calculations in more detail.

[UnclePhilip]

Thanks for replies; it got me to have another look!

I went back into Tax Calc and found how to open up a box into which I could insert a narrative

Best wishes,

Uncle

[Eboli]

so apportioned 50% of costs as CGT relief on the first disposal.

Why?

This is a part disposal and so the correct deduction is the proportion of cost that is the same as the sale value bears to the aggregate of that value plus the market value of the remainder at the date of the part disposal.

See:

https://www.gov.uk/hmrc-internal-manual ... al/cg12731

Eb.

[bluedonkey]

so apportioned 50% of costs as CGT relief on the first disposal.

Why?

This is a part disposal and so the correct deduction is the proportion of cost that is the same as the sale value bears to the aggregate of that value plus the market value of the remainder at the date of the part disposal.

See:

https://www.gov.uk/hmrc-internal-manual ... al/cg12731

Eb.

As I understand it, there were two identical properties, one was sold, therefore 50%.

[Eboli]

there were two identical properties, one was sold, therefore 50%.

Semantics maybe, but this is not what the CGT Act says. It does not matter that the properties are physically identical, what matters is whether their market values are identical at the date of the first disposal. There can be many reasons why one property might have a higher value - though that would not be the case if they were identical in all respects.

I raise it simply because as an ex HMIT it was a common error.

Eb.

[Gengulphus]

there were two identical properties, one was sold, therefore 50%.

Semantics maybe, but this is not what the CGT Act says. It does not matter that the properties are physically identical, what matters is whether their market values are identical at the date of the first disposal. There can be many reasons why one property might have a higher value - though that would not be the case if they were identical in all respects.

Which of course they will never be - different views from windows, different next-door neighbours, quite likely differently-appointed interiors and/or differently-planted gardens (considering that one is likely to have had such things chosen with a sale in mind and the other with the existing owners' personal tastes in mind), etc. They might be similar enough for their values to be identical to within the accuracy of market valuations, but they will never be identical in all respects...

Gengulphus

[PinkDalek]

I've only this second found a reply of yours, where you've resolved the issue, but I may as well post this anyway and I hope you've seen Eboli's later comments.

... I'm quite comfortable with the figures, and on one hand could just submit and be prepared for questions. On the other hand, an explanatory note might make matters clear and lessen the chances of enquiries.

Returning to the OP, I'm not familiar with TaxCalc but do they end up with an equivalent of a Computation Working Sheet (CWS) such as shown on Page CGN 10 here https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876771/SA108_Engish_notes_2020.pdf? If that's the case, I use such a sheet (amended to suit me) to include notes for HMRC etc should they ever decide to look.

I would then, in your case, look for the section of TaxCalc's equivalent of the Capital Gains Summary that asks about estimates etc & consider ticking the box that states "If your computations include any estimates or valuations, put ‘X’ in the box" on Page CG 4 here https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876796/SA108_English_Form_2020.pdf.
Box 54 then has plenty of white space where you could refer back to the CWS.

[UnclePhilip]

so apportioned 50% of costs as CGT relief on the first disposal.

Why?

This is a part disposal and so the correct deduction is the proportion of cost that is the same as the sale value bears to the aggregate of that value plus the market value of the remainder at the date of the part disposal.

See:

https://www.gov.uk/hmrc-internal-manual ... al/cg12731

Eb.

Thank you for this, and I have noted CG12731 for future reference in case of questions.

I remain comfortable with my calculations, as the property was renovated to create two 2/3 bed semis of comparable size.

My view is that this is Self assessment, that my approach is reasonable, that my figures are documented, and that it would require a bad tempered valuer to seek to demonstrate otherwise.

Always possible, of course; but I prefer to think unlikely....

Best wishes,

Uncle