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Capital Gains Tax

Simplifying the capital gains tax on a property when a couple separate
Simplifying the capital gains tax on a property when a couple separate 758 513 Stepping Stones Accountancy

Simplifying the capital gains tax on a property when a couple separate

Many people are still not fully aware of the changes that took place on 6th April 2023 in regards to capital gains tax (CGT) on a property when a couple separate. Previously the old rules were very inflexible where the no gain / no loss treatment could only apply for a short period of time. Whilst it is almost a year since these changes were introduced many people are still unaware of what they mean.

This blog post will explore the details further.

It goes without saying that when a couple goes through a separation it can be a very stressful period. On top of that agreeing on what happens with the assets and associated property can only add to the problems. With the introduction of these CGT changes the following rules will apply:

  • Those involved in the separation can take up to 3 years from the date of the split to issue a no gain no loss transfer on all relevant assets thus minimising any capital gains tax.
  • Any timeframes previously in place for the transferring of assets following a formal split such as a divorce have been removed.
  • If any partner has remained in the shared home then they are entitled to claim private residence relief once the property is sold.

Another major positive with this change is that all parties involved in the separation can take their time and organise all their financial matters without worry or concern that they will face liabilities in relation to CGT. The process of transferring assets is a simple one and any previous issues around dates for separation are removed.

Although on the whole these changes see a number of benefits there are still some areas to be aware of:

  • Some fees around CGT could apply if there are cash agreements in place as part of any separation.
  • If any oversees assets are involved then the no gain no loss rule will not apply, meaning tax payments could occur.
  • If assets are transferred but then later sold there is a high probability that future tax charges will be incurred.
  • Anything in relation to income tax should be treated separately. For example if a family company exists between all parties and dividends are taken then liabilities could be applied.

To conclude when a civil or marital partnership breaks up and there is the requirement for a split of assets it is very important to consider the tax positions for each party. It can be a minefield for individuals to understand especially at a time which is incredibly stressful and emotionally draining. This is why it is recommended that specialist help is sought to assist with the entire process.

For anybody that does has any questions in regards to CGT or in need of any form of accountancy help, please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 20-minute call with Yarka – https://calendly.com/yarka-ssa/20min

Renting home office space to your company | Home Office Accountant Advice | Advice on Home Office Set-Up | Accountancy Support Bristol
Renting home office space to your company 758 513 Stepping Stones Accountancy

Renting home office space to your company

The last few years have seen more of us working from home and although life is slowly returning to normal, many organisations have realised there are many benefits of home working and are encouraging staff to make this change, whether full or part time, more permanent.

Naturally this change in work location incurs additional costs and this is recognised by HMRC with their work from home allowance. Whilst this allowance enables people to reclaim a proportion of the costs of running a home office, it does not allow directors of companies to claim for a percentage of their rent or mortgage interest charges.

To mitigate this, directors are entitled to charge rent to their company for the use of their property, with this then being declared as commercial rent on the directors’ personal tax return and enabling them to also declare a proportion of costs.

It is essential that a rental agreement is put in place between the director and the company so that the director can become the landlord and in turn charge commercial rent. If the rent is charged at the same rate as the costs, then income offsets costs and thus no rental profit needs to be declared. As rental income is not subject to National Insurance many see this as a cost-effective way to release money from your business.

Prior to setting up a formal rental agreement there are some elements that must be considered:

  • Will your mortgage provider/landlord allow you to enter into the agreement and how will it affect your home insurance?
  • Ensure that the agreement only covers trading hours as it is normal for a home office to be utilised for personal use outside of these hours.
  • The proposal to put an agreement in place must be evidenced in the board minutes and cannot be backdated.
  • The agreement must be in joint names if the property is joint owned.
  • Rental costs may include service charges for a proportion of heating, light and power costs.
  • The rental cost must not exceed local commercial rental values, or it may be deemed by HMRC as disguised distributions.
  • The director must genuinely work from home and be able to evidence the costs that are being claimed for.
  • If you are leasing a substantial part of your property or separate buildings then a formal lease agreement would be more appropriate and this must be drawn up with the help of a solicitor as it would be covered by the Landlord and Tenant Act and would have implications for Capital Gains Tax and Business Rates.

If you have any questions or need some accountancy help, please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 30 minute call with Yarka – https://calendly.com/yarka-ssa/30min

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