how to calc. CGT liability on sale of rental prop?

P

PWR

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Hi,
Guidance sought please! Contemplating the sale of our house bought in 1995, but rented out from 2004 - 2011. As I understand it CGT is payable at 25% on the gains made from sale of property (difference between purchase price of about £80K in 1995 and sale price after cost of sale, say E410k, in 2011), after adjustment for inflation (I think Revenue provides a lookup table for this inflation adjustment).

I think it can also be reduced by expenses incurred (maint. costs incurred in the the years that it was not our principal residence so approx. 2004-2011) and refurb/extension (we built a porch, changed sitting room etc. in 1995). Question, can we charge all the maint. or refurb/extension improvements to it?

So, what roughly is the amount of capital gains tax payable? Thanks for your help, I will separately post on the logic of selling to see what the panel thinks.

Best,

PWR
 
Should not maintenace costs have been chared against rental income ? I assume you mean every day decorating, odd plumbing and electricty jobs?

Proper bricks-and-mortar jobs -extensions etc are capital expenditure.

However you main problem is the tax treatment of your property regarding when it was PPR and NPPR. e.g. was it your PPR until 2004? If so why pay CGT on value from 1994 -when it probably rose tremendously.

Am not sure if I'm right - but if you could get away with CGT between 1994-2004 ,even with small indexation which stopped some time ago, then it's a big saving.

You must go to an expert for this -too much money involved to rely only on comments from posters ehre.
 
Tax due would be calculated as follows

(€ 410K - (£80K * 1.277 / 0.787564) )* (8-1)/16 * 25% = € 30K

(Sale proceeds - (initial cost * Revenue inflation factor * euro conversion)) * (period as rental property, in years - 1) / Period of ownership * CGT tax rate

But you need to check on other expenses eg extension, etc
 
oldnick said:
If so why pay CGT on value from 1994 -when it probably rose tremendously.

Am not sure if I'm right - but if you could get away with CGT between 1994-2004 ,even with small indexation which stopped some time ago, then it's a big saving.
Click to expand...

Unfortunately, this isn't possible. The only relevant property values are those at date of acquisition and date of disposal respectively. Variations in the property value in the meantime are irrelevant in calculating CGT liability,
 
Indexation table is on revenue.ie. Maintenance is not allowable. You should have and keep your receipts for capital expenditure.
 
PWR said:
Hi,
Guidance sought please! Contemplating the sale of our house bought in 1995, but rented out from 2004 - 2011. As I understand it CGT is payable at 25% on the gains made from sale of property (difference between purchase price of about £80K in 1995 and sale price after cost of sale, say E410k, in 2011), after adjustment for inflation (I think Revenue provides a lookup table for this inflation adjustment).

I think it can also be reduced by expenses incurred (maint. costs incurred in the the years that it was not our principal residence so approx. 2004-2011) and refurb/extension (we built a porch, changed sitting room etc. in 1995). Question, can we charge all the maint. or refurb/extension improvements to it?

So, what roughly is the amount of capital gains tax payable? Thanks for your help, I will separately post on the logic of selling to see what the panel thinks.

Best,

PWR
Click to expand...

I am not sure with my answer, but the revenue will not provide a look up table for this inflation adjustment. That's what happen to my prop.
 
Thanks to all, checked with accountant and the formula suggested by JPD above is the correct one.

Best,

PWR
 
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