Here's a tricky one. Not really a bookkeeping question but hopefully some of you might be able to help.
A client was given a quarter of a house by her parents in 1998. She lived in the house at that point, the remainder was given to her siblings. In 2003 she acquired the full ownership of the house. No money changed hands at either point, it was the parents gifting the children some stuff. Parents are still alive. In 2006 she moved out of the house and has rented it out until now. She is now selling the house.
Thinking of private residence relief how do I work out the gain given that she only owned a quarter of it at the start. Do I count the months where she only owned a quarter of it as months she owned it and was living in it?
You are not wrong! It is a tricky one, and probably beyond the scope of the forum.
Several things to consider.
The value of the property would be the market value at the time it was gifted. I would say that would be the date when the client became full owner. There is a form available from HMRC (CG34), which can be sent to them to get the market value.
Private Residents relief applies if it is your only home, or main residence, and is only used as your home. If it has not been lived in by your client since 2006, it will not be their main residence, and it is no longer being used as their home.
Because it has been let, they may be able to claim Letting Relief
Thanks for your answer Bill. I had already tried HMRC but the guy there didn't know the answer! I'm waiting for a call back from someone there that will know. I thought here might not be the best place but sometimes I learn more here than anywhere else!
I had a call from a technical person at HMRC so in case anyone is reading and is interested... The ownership of the house starts when she gained her 25% ownership. Costs are 25% of the market value at the initial ownership date plus the market value of the remaining 75% when she gained full ownership. The gain is the selling price minus the costs. Private residence relief can be claimed until she moved out. Lettings relief can be claimed once it was rented out.
