The taxpayer inherited a furnished holiday letting in 1982, at a valuation of approximately £50K. It was jointly owned between himself and his wife. It was sold in April 2009 for £142K. He was concerned about the capital gains tax (cgt) liability, because since April 2008 there is no indexation or taper relief to reduce the cgt.

Firstly, I told him to put any incidental costs into the computation, e.g. legal and advertising costs on sale, to reduce the capital gain.

Secondly, any capital expenditure incurred over the years, not claimable against revenue rental income, is available to reduce the capital gain. It transpired that they had replaced the roof and incurred other capital expenditure, which reduced the gain significantly. We looked on page PIM2020 of the Revenue Capital Gains Manual and page BIM35465 of the Business Income Manual to determine whether his expenditure qualified as capital expenditure.

Thirdly, I showed him on page CG63965 of the Capital Gains Manual, that Entrepreneurs Relief is available to reduce the capital gain on the sale of qualifying furnished holiday lettings. This reduces the gain by 4/9 ths. I checked on page PIM4112 of the Property Income Manual to make sure that he complied with the rules for furnished holiday letting.

Fourthly, both he and his wife had the capital gains tax annual exemption available to them. By the time we finished, the total capital gains tax liability was about just over £3K.
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