I'm assuming that the summer house had no commercial substance, therefore I'm afraid not.
Its one of those things, unless second homes are run for a large chunk of the year as a commercially viable business, perhaps as a holiday let. Then how it was financed is immaterial to the calculations of capital gains.
The final calculation will be down to how much you make on the sale less your capital allowance for the year. (selling price - buying price - capital gains allowance).
Normally on here such transactions relate to business premises so I would be interested on peoples view as to whether the legal and other supplementary costs of buying and selling the property are allowable parts of the calculation for private properties.
With a bit of tax planning the gain on the second property could have been avoided. I'm not going to offer tax advice on this forum but have words with your accountant about how you should have appraoched this transaction. If you take their advice be prepared to defer the sale for around a year.
all the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The house was used as a holiday house for the owner. I know how to do the tax calculation, but can't find info if the mortgage interest can be deducted in any way from it?
The house was used as a holiday house for the owner. I know how to do the tax calculation, but can't find info if the mortgage interest can be deducted in any way from it?
If the tax calculation relates to my workings, then be careful!
Oops, sorry, completely missed your other post Nick. (does happen occassionally).
Nicks original post is spot on Agnes.
The mortgage interest is not a variable in the calculation for second homes, only the amount of mortgage outstanding.
As both Nick and myself have mentioned, how the purchase was funded including the funding of any repairs and enhancements is immaterial.
has your client considered selling their main residence rather than the holiday home as there are distinct tax advantages.
There are lots of other ways around the capital gains but it needs tax planning which your client does not seem to have considered. They would be best speaking with an accountant about this matter not least as if they act on your advice and it proves that better advice should have been given on this then you are liable to put the client in the situation that they would have been in had they been given the correct advice.
Also worth noting here is that advice of this nature is unlikely to be covered by your PII insurance so we are talking about personal liability for any loss incurred by the client.
Sorry if this sounds a bit strong but when it comes to broaching accountant territory bookkeepers need to be very wary of any advice they give or actions that they take.
If you continue with this then at the very least get it in writing from the client that you advised them to see an accountant and they refused that advice.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
