I’m reporting capital gains tax (CGT) on a flat I inherited in two parts: 50% in 2018, and 50% in 2022. HMRC says I need to submit two CGT returns, one for each share. I’ve split the sale price and CGT allowance 50:50, but I’m unsure how to handle shared costs like estate agent fees, legal fees (for the sale) and, most importantly, capital improvements which were done in 2023. I am not sure how I halve them across the two returns, or if they have to be allocated to the event at the exact time. If I allocate the 2023 capital work to the 2022 return, it ends up showing a loss, even though the overall sale made a gain. Can I reasonably split all the costs across both transactions, or do I just accept a loss? Could I use that loss to reduce what I pay for the earlier gain? 

Arthur Weller replies 

HMRC treats each 50% slice you inherited as a separate asset, so it requires two CGT computations. When a single sale involves several interests in the same property, the CGT rules let you apportion any figure that belongs to the whole transaction (price, selling costs, later improvements, etc.) on a ‘just and reasonable’ basis. Splitting them 50:50 is the simplest, most defensible method, and avoids deducting any item twice. If a fair split still leaves the 2022 share showing a loss, that is an allowable capital loss; you can offset it against the gain on the 2018 share (and any other gains of the tax year in question) when you complete your self-assessment.