Allowable expenses for Capital Gains Tax (Loss) for accidental landlord

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gnf_ireland

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I have a question around the allowable expenses when calculating a capital gains tax gain/loss for an accidental landlord. I will give random numbers, but its more to assist with the initial calculation, before talking it through in detail with the accountant (who can be difficult at times!!)

Say house owned for 10 years, lived in for 18 months by landlord and rented for the remaining 8.5 years. Understand the PPR element is the time lived in and the last 12 months, so 2.5 years or 25% of the gain/loss. The remaining 75% of the gain/loss is taxable

House purchased for 300k December 2006 *Stamp exempt as FTB*
Stamp paid of 10k July 2008 *Paid Stamp when rented out as no longer a FTB*
Tenants vacated September 2016
Repairs to house caused by tenants - 5k [professional cleaning services, repair damaged walls etc]
Refurbishment to house to increase sale price - 10k [sanding & varnishing floors, new carpet, painting etc]
House Sold for 250k December 2016
Estate Agent fees 5k
BER Cert 250€
Solicitor Fees 2k

I am assuming the only thing above not allowable is the repairs caused by the tenant, which should be offset against the rental income for the year. The remainder should be included in the calculation

House cost 310k (cost + stamp)
cost of sale 17,250
proceeds 250k

Chargeable Loss is 77,250
70% of this is 54,075€ and this is the deemed chargeable loss for tax purposes

Is this a 'fair' calculation?
I am assuming the mandatory cost of sale (estate agent, BER Cert and Solicitor Fees) are deductible.
I am assuming the investment into the house to increase the sale price is also a reasonable allowable expense, especially since it was done immediately before the sale
I am also assuming that the Stamp Duty is a reasonable expense since it relates 100% to the fact the house was treated as an investment property and would not be due if the house was a PPR
 
That refurbishment stuff wouldn't be allowable.

Other than that, your calculation is reasonable.
 
@Gordon Gekko Thanks for the comment above and is generally in line with what I expected.

The refurbishment cost in advance of sale is not allowable? Interesting as one would assume would increase the value of the asset and therefore increase sale price. I am assuming in that instance it would be offset-able against rental income for that year, or is it simply 'down a black hole' with no relief available on it?
 
It would go against rental income. From memory, for carpets one claims capital allowances against rental income, but I could be wrong on that. The rest of the stuff is clearly "repairs".
 
gnf_ireland said:
@Gordon Gekko Thanks for the comment above and is generally in line with what I expected.

The refurbishment cost in advance of sale is not allowable? Interesting as one would assume would increase the value of the asset and therefore increase sale price. I am assuming in that instance it would be offset-able against rental income for that year, or is it simply 'down a black hole' with no relief available on it?
Click to expand...

Gordon Gekko said:
It would go against rental income. From memory, for carpets one claims capital allowances against rental income, but I could be wrong on that. The rest of the stuff is clearly "repairs".
Click to expand...

All of the costs described as refurbishment above are likely to be repairs - they are simply restoring the fabric of the property to a state that it was previously in; in order to qualify for CGT deduction they would have to be enhancement of the property (not beyond its current state, but beyond the state the house was previously in. e.g. the house still has the original bog standard single glazed windows installed in the 1970's, and you install state of the art triple glazed windows, this expense is arguably an enhancement).

However, as they are incurred after the final letting of the property with a view to preparing it for sale, they do fall into a black hole, as they won't be deductible from any rental income.
 
You don't appear to have included any other purchase costs other than price and stamp duty, did you not have any other purchase cost e.g. solicitor fees, estate agent fees and surveyor/architect fees when purchasing the house as these would be allowable too. Perhaps you have these included in the 310K but just in case. The fees you have listed seem to be sale costs.
 
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