Retirement Guest House owner CGT liability

sc12

I hope someone can help. My dad is a guesthouse owner and at 73yrs is finally retiring this year and selling to downsize. Its a 3 storey property, there are 9 bedrooms, 3 are used by family, 1 is used for storage so 5 have been in use by guests. One floor has the kitchen and dining room which is solely the family's area after breakfast is served. The property has been valued at 1.2m. How will the CGT be calculated? From doing a bit of research on the internet it would seem that 500k can be exempt for retirement relief and there is also the ppr exemption but how can we calculate how much is the guest house and how much is the ppr for CGT purposes?

barneystinson

sc12 wrote: »

I hope someone can help. My dad is a guesthouse owner and at 73yrs is finally retiring this year and selling to downsize. Its a 3 storey property, there are 9 bedrooms, 3 are used by family, 1 is used for storage so 5 have been in use by guests. One floor has the kitchen and dining room which is solely the family's area after breakfast is served. The property has been valued at 1.2m. How will the CGT be calculated? From doing a bit of research on the internet it would seem that 500k can be exempt for retirement relief and there is also the ppr exemption but how can we calculate how much is the guest house and how much is the ppr for CGT purposes?

Pay for good professional advice from a proper tax consultant with experience in this sort of exercise.

sc12

barneystinson wrote: »

Pay for good professional advice from a proper tax consultant with experience in this sort of exercise.

Thanks for replying. My dad has an accountant who has advised that it would be calculated on sq footage basis i.e business accounts for 70pc of entire house and that kitchen and dining room would be accounted to business even though its only used for breakfast for guests and by the family for rest of the day. So we wanted to see if there were a few ways in which this can be calculated or is that the only way. If he is correct then we will go with his calculation.

scheister

sc12 wrote: »

Thanks for replying. My dad has an accountant who has advised that it would be calculated on sq footage basis i.e business accounts for 70pc of entire house and that kitchen and dining room would be accounted to business even though its only used for breakfast for guests and by the family for rest of the day. So we wanted to see if there were a few ways in which this can be calculated or is that the only way. If he is correct then we will go with his calculation.

I would think the accountant is on the right track but i would only consider a section used purely for the guesthouse as falling out of PPR relief. Also need to look at if if was guesthouse all the time as it can be time apportioned.

barneystinson

sc12 wrote: »

Thanks for replying. My dad has an accountant who has advised that it would be calculated on sq footage basis i.e business accounts for 70pc of entire house and that kitchen and dining room would be accounted to business even though its only used for breakfast for guests and by the family for rest of the day. So we wanted to see if there were a few ways in which this can be calculated or is that the only way. If he is correct then we will go with his calculation.

That's why I'm telling you to pay for specific advice. There's no single prescribed way to do a calculation like that.

FWIW I wouldn't agree with the accountant re the kitchen & dining room, unless there's a separate facility for the family.

dogsears

I would echo what Barney Stinson says and also say what you have found out on the Internet yourself about 500k being exempt due to retirement relief is much more complicated than that. Its quite possible that retirement relief is worth a lot less to your father than you think (possibly he may get no relief) so it is vital to take good professional advice. It can be expensive but can help identify reliefs to claim and how much they could be worth to you and it can prevent very much more expensive mistakes that can be made when actions are taken based on what people pick up on the internet (speaking from the p.o.v. of having been asked to pick up the pieces in similar situations).

Glass fused light

Just to add the accountant will be aware of the % split which had previously been applied to the upkeep of the fabric of the building so it's risky to try move the goal posts when the business is being closed.

sc12

Thank you everyone for your replies, it is very much appreciated and helpful.