ACCA ATX ^UK Syllabus A2. Chargeable gains - Principal private residence relief - Past Papers ^{2 / 2}

Demeter is seeking advice on the relief(s) available to reduce the chargeable gain on the sale of his house.

Demeter:
– Is UK resident and domiciled.

– Will be a higher rate taxpayer in all relevant future tax years.

– Has relocated to London, from Manchester, a city more than 150 miles north of London, to take up this employment.

House in Manchester:
– Demeter purchased the house on 1 May 2005 and lived in it as his main residence.

– Demeter let the top floor of the house (comprising 30% of the total house) to tenants from 1 May 2007 to 31 October 2018. The tenants did not share Demeter’s living accommodation or take meals with him.

– Demeter continued to occupy the remainder of the house as his main residence until 31 October 2018, when the entire house was sold.

– The sale gave rise to a gain, before any reliefs, of £94,000.

– Demeter did not own any other house throughout the period from 1 May 2005 to 31 October 2018.

Required:
(b) Identify, and calculate, with brief explanations, the relief(s) available to Demeter to reduce the chargeable gain of £94,000 on the sale of his house in Manchester on 31 October 2018. (6 marks)

Your client, Dan, requires advice on the potential chargeable gain arising on his proposed disposal of his UK house.

Dan:
– Is domiciled in the country of Skarta.
– Is unmarried, and has no children.
– First became resident in the UK on 1 July 2012.
– Left the UK on 1 January 2016 to go travelling.
– Returned to the UK for the first time on 15 May 2017, when his father was taken ill.
– Intends to work part time in the UK throughout the month of July 2017 only.
– Will remain in the UK until 5 August 2017, when he intends to move permanently to Skarta.

Dan – disposal of his UK house:
– Dan purchased a house in the UK on 1 October 2012 for £286,000, where he lived until 1 January 2016.
– He has not lived in the house since this date.
– He allowed his father, Noah, to live in the house, rent-free, until his father’s death.
– He has agreed to sell the UK house on 1 August 2017 for £318,000.
– The house was valued at £297,000 on 5 April 2015.

Required:
(b) (ii) Calculate the chargeable gain arising on the disposal of Dan’s UK house on 1 August 2017 under the residential property rules applicable to non-UK residents. Dan will not elect to be taxed on the whole of the gain but will elect for the gain to be time-apportioned if it is beneficial to do so. (6 marks)

Kesme and Soba, a married couple, require advice on the capital gain on a future sale of the family home

Rental income in respect of furnished rooms in the family home:
– Kesme and Soba purchased the family home on 1 July 1990 and have lived there since that date.
– Three furnished rooms have been rented out to an individual tenant since 6 April 2013.
– The tenant does not share Kesme and Soba’s living accommodation or take meals with them.
– The three rooms represent 30% of the property.
– The annual rent is £14,400 and there are allowable expenses of £1,600 per year.

Required:
(b) Explain the effect of renting out the furnished rooms on the amount of the taxable capital gain on a future sale of the family home. (6 marks)