A1 Assessment Brief (word count – 1500)
Bridget Bardot is a UK resident taxpayer. She purchased a house in London with a large garden on 01.10.1999 for £160,000 and paid 1% stamp duty plus legal fees of £863 in addition to the purchase price. She lived in the property up until 22/12/2012 when she rented the property out. On the 12/09/2019, the letting ended, and she moved back into the house the following day.
She sold a plot of land from the garden with planning consent on 29/01/2020 for £160,000. She continued living in the house until she sold it on 18/12/2020 for £570,000. Her incidental costs for both transactions combined were £16,537. Her pre-tax income for 2019-20 before gains was £18,000. Her pre-tax income for 2020-21 before gains is £13,500.
Expenditure on improvements to the property during her period of ownership were as follows:
2002 New Windows £3120
2004 Driveway £6400
2009 New bathroom £2500
2010 Rear extension £60,000
2016 Architect fees and planning consent £8,000
2019 New Roof £4000
2019 Demolition of part of extension £4790
Total £88,810
Required:
1. Calculate the gain arising for 2019-20 and 2020-21 before any applicable reliefs. (20 Marks)
2. Calculate the taxable gain for 2019-20 after application of applicable reliefs (20 Marks)
3. Calculate the gain for 2020-21 after application of applicable reliefs (20 Marks)
4. Calculate the CGT payable for 2020-21 (20 Marks)
5. Write a letter to Ms. Bardot explaining what CGT (if any) is due for 2020-21and when it is due for payment with reference to the changes relevant to gains on residential property and letting relief that came into effect from 6 April 2020. (20 Marks)
(Note: treat enhancement expenditure as shared between both disposals and round off calculations for Principal Private Residence Relief and/or Letting relief to the nearest month.
