Capital Gains Tax Relief Missed by Accountant – £60,000 Negligence Claim

Business Sale and Tax Advice

Mr and Mrs S owned a flat, which was classed as a business asset for tax purposes. In the spring of 2013, they decided to close their business and sell the property. They approached their accountant for advice on the tax implications of taking this course of action.

Incorrect Guidance on Capital Gains Tax (CGT) Relief

They were advised that the transaction would benefit from a certain tax relief whereby the amount of Capital Gains Tax paid would be reduced from a rate of 28% down to just 10%. However, they were not informed that this type of tax relief is commonly disqualified if the property in question is rented out in the final year before the business is closed.

Letting the Property – A Critical Oversight

As they were unaware of this exception to the tax relief, Mr and Mrs S agreed to let their flat to tenants in September 2013. The sale of the property was not finalised until early 2015. They were unable to benefit from the reduced rate of Capital Gains Tax due to the fact that they had entered into a tenancy agreement in the final year before the property was sold.

Financial Impact of Accountant’s Advice

Mr & Mrs S contend that they would have kept the property vacant for the 12 months before the sale had their accountants advised them that this would have increased their chances of obtaining the tax relief.

Pursuing a Claim for Professional Negligence

We are currently acting on their behalf in a claim for accountant negligence. We are seeking to recover compensation to reflect the amount that they now have to pay in additional tax. The case is ongoing and an amount of over £60,000 is being claimed.