No receipts for CGT calculation on Buy to Let property

[Chloe Brown Summers]

We are selling an investment property (house) we purchased 32 years ago.

We improved and renovated the property at the time, however, cannot find any receipts now, either for the work or solicitor/mortgage costs.

Will HMRC likely accept a list of works & estimate of costs in this case?

 

[Spur Support Services]

You may well find that the original completion statements is stored in the Deeds bundle, so ask your solicitor (or bank) for the bundle. If the solicitor was also involved in the improvement process, there may also be details of planning applications in the bundle.

In the absence of hard documentation, in respect of improvements and renovations, you will need to be careful that the works are capable of being claimed as capital improvements rather than those that have been treated as revenue expenses (which would have been claimed against your rental income).

HMRC may accept estimates, but you should state that estimates have been used and ensure that you have a robust argument for the values stated.

 

[MyAccountantOnline]

...
Will HMRC likely accept a list of works & estimate of costs in this case?

Very difficult to say but I think you'd be very lucky if they do.

What are the total costs and what work was undertaken?

 

[Chloe Brown Summers]

Very difficult to say but I think you'd be very lucky if they do.

What are the total costs and what work was undertaken?

Hello and thanks for the reply.
Cost of works probably around £10k

 

[MyAccountantOnline]

Hello and thanks for the reply.
Cost of works probably around £10k

You are very welcome.

I do think you'll be very lucky to get HMRC to accept that with no evidence, but if you provide as much detail as possible making it absolutely clear you've estimated the costs they may accept it.

I had a case a few years ago where HMRC accepted some estimated costs on a house sale I think from memory it was about £2,000.

 

[Argentum Tax]

Will HMRC likely accept a list of works & estimate of costs in this case?

The gain you calculate and the tax you pay will be subject to 'self-assessment' as with most taxes, and therefore the onus is entirely on you to get the calculation right. If you use any estimates then you need to ensure that you tick the appropriate box on the Tax Return.

HMRC will only ask for lists, documents etc if they raise enquiries into the calculated gain. As I understand it, most calculations under self-assessment are not enquired into by HMRC. However if estimates are included this is bound to increase the likelihood somewhat of an HMRC enquiry, but it should also mitigate any penalty charge should HMRC take exception to any estimates.

You should ensure that any estimates are reasonable and be prepared to defend them if the need should arise. However, in my experience, HMRC do not always enquire into declared gains even where the 'estimates' box is ticked. I suspect most declared gains go through 'on the nod'.

 

[Bobbo]

If you have some photos of the property before and after the works this would provide some evidence of the estimated costs in the event of an enquiry.

Unless i'm misreading your post you're saying the improvements were carried out at the time of purchase. While £10,000 would get you a lot more 32 years ago than now, are you content that the work done is reflected in the state of the property at its date of sale?

 

[Financial-Modeller]

If you have some photos of the property before and after the works this would provide some evidence of the estimated costs in the event of an enquiry.

And 32 years ago, those photographs would have been taken on a film camera, retained in a photo album somewhere. Patrick O'Reilly's handwritten receipt is probably nearby too; have another look, OP.

 

[Vin Gupta]

Hello Chloe, I think this will be fine. Your property will have appreciated a lot over 32 years, and a lot of CGT will be payable - even with the £10k of costs. HMRC are unlikely to ask any questions

If they do open up an investigation, you just need to explain your situation. It think it's perfectly fair, given that you held the property for 32 years.

The worst that happens is that they say no

 

[Argentum Tax]

The worst that happens is that they say no

And HMRC could well make a penalty charge (which is appealable) if they think the original computation on the Tax Return was wrong.

 

[Vin Gupta]

And HMRC could well make a penalty charge (which is appealable) if they think the original computation on the Tax Return was wrong.

I don't think they would do that in this case.

Given that the individual has held the property for 32 years, it's not surprising that they don't have all the receipts. Very few people had computers in the 1980s

In my experience of dealing with HMRC, they aim to be reasonable

 

[Argentum Tax]

I don't think they would do that in this case.

I agree, they may not raise a penalty, but this would be based upon the circumstances rather than on any aim to be 'reasonable'. The lack of all the receipts over 32 years would not be the defining issue. HMRC would make a judgement as to the correctness and reasonableness, or otherwise, of the original self-assessment of tax on the Tax Return as submitted compared to what was actually agreed after enquiry.

If they judge that a penalty arises because of a lack of reasonable care, the penalty would be between 0% and 30% of the extra tax due.