Chattels and private residence

Question 1

What is a chattel?

Answer 1

A tangible moveable property.

Question 2

How are chattels categorised?

Answer 2

• Wasting chattels - life ≤ 50 years like racehorses and greyhounds
• Non-wasting chattels - life > 50 years like painting, antiques and jewellery

Question 3

For non-wasting chattels, what happens if the cost is < £6000 and the proceeds are < £6000

Answer 3

The item is exempt

Question 4

What happens if the cost is > £6000 and the proceeds are < £6000

Answer 4

You restrict the loss
Gross proceeds = £6000

Question 5

What happens if the cost is < £6000 and the proceeds are > £6000?

Answer 5

Lower of:
* Normal gain
* (gross sale proceeds - £6,000) * 5/3

Question 6

What happens if the cost is > £6000 and the proceeds are > £6000?

Answer 6

Normal CGT disposal

Question 7

How is private residence determined?

Answer 7

• By periods of occupation of the property.
• Properties owned but not lived in by the owner are fully chargeable to CGT.
• PPR must be pro-rated if part of the house has been used for business purposes.

Question 8

What are the residential rates of capital gains tax?

Answer 8

• Where the gain on the sale of a residential property is not fully covered by the relief, special residential rates of capital gains tax will be applied to the gain.
• For 2023/24, the lower rate is 18% as opposed to the normal rate of 10%, and the higher rate is 28%, rather than 20%.

Question 9

How do you calculate principle private residence relief?

Answer 9

PPR relief = Period of occupation / Total period of ownership * gain

Question 10

In summary, what happens when properties are disposed of?

Answer 10

For properties which are disposed of:
* Principal private residence for full period of ownership = exempt
* Never occupied = fully chargeable to CGT
* Occupied for part of the period of ownership = calculate full gain and deduct PPR relief (calculated based on the proportionate period of occupation)

Question 11

What can be considered deemed occupation?

Answer 11

• The last 9 months provided the property was lived in by the tax payer at some point.
• Any period the taxpayer was overseas due to employment
• Any period (up to 4 years) the taxpayer was employed to work elsewhere in the UK
• Any period (max 4 years) self employed taxpayer had to work away from home
• Any period what ever reason not exceeding 3 years

Question 12

In relation to principle private residence (PPR), how can one tax plan?

Answer 12

• Carefully check and if possible, plan periods of absence from the property to try and ensure that deemed residency will apply
• It would be sensible to try and ensure all periods of absence are preceded and followed by ACTUAL occupation
• Make use of the last 9 months deemed residency by selling the property within 9 months of leaving the property.