Guest Houses

[pitsfordcruiser]

I may be in the wrong place,. but...... can anyone direct me to a site which will explain exactly how I calculate Capital Gains Tax implications of using my home as a Bed & Breakfast/Guest House property?

I have owned the place for 16 years, and want to do the exit sums before I start the venture so that I can see what I might gain (or lose !) in tax. Thanks.

[plym77]

can you let me know a little more please. I may be able to help you

Have you been running the guest house as a proper business - ie. preparing accounts and tax returns etc. How many rooms are rented out? are they just short term rental (ie. for holidays) or do you have long term tenants? Do you supply breadfat? Evening meal? is there a separate part of the property used solely for personal use - ie. your family home?

[pitsfordcruiser]

Thanks for your reply.

i am at the start of my planning just now, and expect that the thing will be run as a business, and that the guests will only stay a few nights at a time. There is no intention to offer an evening meal, but the rooms used will be dedicated to the B&B / Guest House function.

Is that any help? I have to do some modifications before I can start marketing the business, but I'm not goin g to start that until I know whether the venture is likely to make a reasonable return on my investment.

I look forward to hearing further from you

[plym77]

There are several elements to a capital gains tax computation, in your case principal private residence (PPR) relief, indexation, non business asset taper relief and business asset taper relief.

Dont take this the wrong way but the calculation you wish to perform is better done by an accountant or tax specialist. Your situation is among the more complicated on property sales since it involves various time spans and uses.

Try these links which will help you to understand the various reliefs and CGT

http://www.hmrc.gov.uk/leaflets/cgt1.htm

Have a read of the info above - particularly taper relief - in your case you have mixed use, by time span (in that it was a non business property before business) and possibly going forward proportions (assuming you will reside in the property, most owners of guest houses do). Where an asset has been used partly as a business asset and partly as a non-business asset throughout its period of ownership, or the last 10 years of its period of ownership, whichever is the shorter, the gain is apportioned pro rata. Part of the gain qualifies for business asset taper over the whole period of ownership; the other part for non-business asset taper, also over the whole period of ownership.

If there are any areas in particular that confuse or need clarification, please do ask (I am a Chartered Tax Adviser)

You will appreciate that in your case the calculation is unfortunately not that straight forward

I appreciate that this doesnt really answer your question entirely, but hopefully helps a bit.

Plym77