Capital gains tax record-keeping

Overview

If you make a taxable capital gain, you generally need to complete a self assessment tax return or make some other report to HMRC. We discuss the reporting requirements at Capital gains tax reporting. You need to keep relevant documents in connection with the gain or claim for losses or other reliefs. Essentially, you need records that, if necessary, will enable you to answer any HMRC queries.

When we refer to market value in the following guidance, we mean the price your asset might reasonably be expected to fetch on the open market.

You usually acquire an asset when you buy it, but you might also have inherited it, received it as a gift or some other way.

In all cases you need to keep records of the original cost, incidental costs associated with acquiring the asset and sometimes records showing the value of the asset on a specific date.

Values on acquisition and disposal

You may need to keep a record of some or all of the following:

The original cost

If you bought the asset after 31 March 1982 you need to keep records showing the original cost of the asset – such as receipts for purchase. If these are not available you may need to get a valuation of the asset at the date of acquisition from, for example, an estate agent or an auctioneer and you need to keep proof of any such valuation safe for future use.

If you received the asset some other way – for example by inheritance or gift – you need to find out the market value on the date you acquired it. If you inherited the asset, the executors of the deceased should have provided you with this information.

The market value on 31 March 1982

If you owned the asset on 31 March 1982, you need to work out the market value of the asset at that date and use this in your capital gains tax (CGT) calculations instead of your actual costs up to that date. You need to keep any records that help you do this.

You may need to get a valuation of the asset at 31 March 1982 from, for example, an estate agent or an auctioneer and you need to keep any such valuation safe for future use.

Market value at other dates

There are other times when you need to use the market value of the asset on a specific date in your CGT calculations instead of the cost.

For example, if you dispose of an asset left to you in a will by a relative or friend, you use the market value on the date of death instead of any actual cost in your calculations. This valuation might have been done when the person died, especially if an inheritance tax return was completed. If so, you will use that valuation as your cost.

Or, if you gave an asset to your child, you use the market value on the date of the gift as the proceeds, instead of any amount received. Your child would then use that market value as their cost if they dispose of the asset in future.

You may need to get a valuation of the asset from an estate agent or auctioneer. If you want, you can get HMRC to check your valuation so that you have an agreed figure for your tax return. In that case, you should complete and send form CG34 Post Transaction Valuation Check to HMRC after you have disposed of the property.

Additional records you may need to keep

If you incurred other allowable costs when acquiring the asset – such as stamp duty land tax (or land and buildings transaction tax in Scotland/land transaction tax in Wales) and any fees paid for professional advice, estate agents costs, valuation fees or other costs of transfer including advertising – you need to keep a record of the amounts involved and any documents relating to that expenditure.

You deduct these costs in the calculation when working out any capital gain.

You can also deduct any VAT on the costs, unless you are VAT registered and can reclaim the VAT.

When you dispose of your asset

You usually dispose of an asset when you sell it, but you may also give it away, exchange it for another asset, transfer it to someone else or it may have been lost or destroyed.

In all cases you need to keep records of the 'disposal proceeds' – usually the amount you receive – and sometimes records showing its value on a specific date.

You also should keep records of the amount you receive if you otherwise dispose of the asset – this may include, for example, a sum received as compensation for a damaged asset.

Any extra costs

If you spend money selling or otherwise disposing of an asset – such as legal fees, valuation fees or advertising costs to find a buyer or an estate agent’s commission – and you deduct these in your CGT calculation, you need to keep records of these costs.

Costs during ownership

There are other costs during your ownership of an asset which can be deducted from the calculation for CGT purposes:

Improvement costs

If you have spent money improving the value of your asset, you may be able to deduct these costs, as long as the improvement is still reflected in the value of the asset when you dispose of it. For example, if you build a garage to add value to your property – and it is still part of the property when you sell or dispose of it – you can deduct the cost of the garage.

You cannot however include maintenance costs, such as decorating or any repairs.

You can also deduct any VAT paid on improvements, unless you are VAT registered and can reclaim the VAT.

If your base cost is based on market value (for example, it was a gift to you or it was inherited), you cannot take a deduction for improvement costs which have been incurred prior to the date of the valuation. 

Confirming you own the asset

If you spend money proving that you own or have rights over an asset you may be able to deduct this cost.