I am computing the capital gain on a rental property I have transferred to my son. When I first purchased the property in 2008, I received an empty property grant of £18,000 from my local authority towards the renovation costs. Does this need to be included (i.e. deducted from those capital costs) or can I ignore it and put in the full capital costs against the gain?
Arthur Weller replies:
Generally grants from a local authority reduce allowable expenditure as you will see in HMRC’s Capital Gains manual. However, it depends whether at the time the renovation costs were claimed against rental profits. If they were, these renovation costs are not capital expenditure anyway. And even if they were not claimed at the time, these renovation costs can only be allowable capital expenditure if they qualify as per HMRC guidance in its Property Income manual.