BBC NEWS | Programmes | Working Lunch | The taxman answers your questions

John Whiting from PricewaterhouseCoopers tackles your tax queries.

Emma writes: " I am selling a house that I lived in for seven months from May 1994.
"It was then let continuously until October 2001. I bought it for �64,000 and am selling for �125,000.
"Am I liable to Capital Gains Tax and if so, is there any way I can reduce it?

"I believe that because it was my main residence for seven months then I am only liable for 17/24 of any gain, less the indexed amount and my CGT allowance."

Basically you're right - you may be in for a CGT bill, but not on the total gain you make.

As this has been your home (I assume you've had another and made it clear to the Revenue which is to be exempt), you're taxed on a proportionate part of the gain.

You don't pay on the time you lived there on the last three years some other times eg working abroad (provided you live there after the period abroad)

On the surface you'll pay tax on 47/90 of the gain, working to the nearest month.

Your gain will be about �50,000 after costs and indexation to April 1998.

Taking into account tapering and your annual CGT exemption, the CGT bill will reduce to something of the order of �6,000, and may be lower depending on your tax rate.

Also, don't forget any capital losses that you have that could bring the bill down further.

However, there is a further "lettings relief" which applies when someone sells their home that has been let out in whole or in part for part of the time they have owned it.

This exempts from CGT the lower of the same amount that is exempt as a result of the general exemption (so 43/90ths of the gain or some �22,000).

So in fact this extra relief will exempt most of your gain. With tapering and your annual exemption it will probably mean you have no tax to pay.

Jill & Keith Hartley write: "As executors of an estate there is often a considerable delay between the date of death and probate being granted.

"In our own example this has been three months, and yet all valuations are based on the date the death occurred.

"This year more than most, and due entirely to stock market fluctuations, some of the share holdings in the estate are considerably lower (than three months ago.)

"Will the Inland Revenue capital taxes office take into account these lower valuations when we come to pay the remainder of the Inheritance Tax which is due soon?"

There is an IHT relief that recognises this problem.

As you say, IHT is computed on the value at the date of death - which can be very different from any sale proceeds.

So, for quoted shares sold by the executors within one year of death, the total sales proceeds can be substituted for probate (ie death) value and IHT recomputed.

There is a similar relief (it works slightly differently) for land sold within three years of death though that I suspect is less used at the moment!

Chris Arnold in Cambridge writes: "Myself and my girlfriend have lived together in a house that I alone own, for two years.

"We are about to get a new joint mortgage and put the house in joint names.

"Are we liable for stamp duty again?

"If so, how can the government justify charging us twice?"

This isn't as easy as it may sound.

A straight gift is normally outside stamp duty - the tax operates in essence by taxing the consideration (or value or money) given for a transfer.

So no consideration, no stamp duty.

The snag that you may have is if you have an existing mortgage and that transfers with the house to your joint names, then in effect your girlfriend is giving some consideration - she is taking on half the mortgage.

If you keep the mortgage, and your girlfriend takes no responsibility for it, then we are back to nil consideration.

But that may not be acceptable!

Even if you are caught, there may still be no duty to pay.

Suppose the house is worth �200,000, subject to a �100,000 mortgage.

If you give her half, and she shares the mortgage with you, then she has in effect paid half of the �100,000 - �50,000 - which is at least under the �60,000 threshold for stamp duty.

V Evans asks: "Is it true that the working families tax credit is being replaced only after a year?

"My sister received a form on Saturday to say that a new credit would go to the main carer but it is a lot less than WFTC and means her husband and all husbands would now see a rise in their tax bills."

The Working Families Tax Credit and related Disabled Persons Tax Credit actually started in October 1999 but it does indeed go from next April, as does the Children's Tax credit, which started in April 2001.

In most cases, both credits tend to be given to the main (or only) earner in the family.

The replacements are;

The Working Tax credit (WTC) - available to those without families

The Child Tax credit (CTC) - for those with children

The WTC will go to the main earner again but the CTC will normally go to the main carer - probably the mother.

So it may well be that husband loses money - but wife should gain at least the same (not guaranteed though as the calculations will be different).

These changes before we have all got used to the existing system do seem excessive.

But they are a central plank of the government's strategy to help those with children and the low earners.

For more details, contact the Inland Revenue - your local office will be able to advise and we can expect a significant publicity campaign in the coming months.

See also the Inland Revenue's website or call the WFTC helpline on 0845 609 5000.

Dr Mireille Cantarini's French grandmother has just passed away and she is in line to inherit a quarter of the estate.

What are the inheritance tax implications for money received from outside of the UK?

Mireille pays tax at 40%.

There will be no UK IHT to pay - IHT is paid on what you leave behind, not on what you inherit (despite the name).

You get the assets at value at date of death for CGT purposes - watch exchange rate movements on any subsequent sale.

There may be implications with the French equivalent of IHT of course but presumably the executors of your grandmother will advise.

Georgina Withers and her husband are buying a holiday home to rent out.

How and when do they confirm their venture with the Inland Revenue?

They say they don't want any "nasty letters" from them!

Also, S Ahmed is 52 and has a stakeholder pension, which he started last year.

He wants to buy a house and let it out and use the rent to supplement his pension.

Would he be liable for income tax and if so at what rate?

There are a few general points to make in answering both these questions.

Income tax is due on profits from renting, ie rents less costs.

You need to tell the Revenue (by 5 October after the year you start renting) about your new activity so that they can issue you with a tax return to collect details about the income and expenditure.

You can deduct running costs, repairs etc and (if furnished) 10% wear & tear allowance from the rents in computing the profits you make.

There will be a CGT bill if you sell the property at a gain later on.

There are some additional reliefs on holiday homes, mainly in terms of possible CGT relief.

John in Skegness hasn't worked for a few years, so is it possible to claim tax back on his accounts such as an instant access savings investment?

If so how does he arrange it? How far back will they go?

And what will he need to provide?

Yes, you can reclaim the tax you've paid.

You can normally go back up to six years (though of course it may be that you only stopped working and thus had little income a couple of years ago).

You need to contact the Revenue for a form R40 for each year affected.

You simply complete and send it in.

You'll need to have evidence of interest received and tax deducted.

The bank should be able to supply, but that doesn't have to go with the claim, though the Revenue may well ask to see it.

F H Perrin in Luton has what he calls a question of general interest.

Does every organisation pay Capital Gains Tax on amounts in one year over �7,000 and would that apply to the gain of �12m made by Leeds United on the sale of Rio Ferdinand to Manchester United?

Yes, companies (and the football clubs are companies) pay tax on capital gains, but they don't get an annual exemption as individuals do.

In fact the profits (or losses) on the sale of footballers are treated as part of their trading income.

So they will pay corporation tax, probably at 30% on their gains on the transfer market, though they may of course have other losses and allowances to offset.

Joan James asks: "Please could you explain the tax position on shares which are issued free to the shareholder.

"I held Sema Group shares for some time buying in 1991,1997 and 1998.

"In 1998 the company gave shareholders three free shares for every one share which they held.

In 2001 Sema Group was taken over by Schlumberger and a cash-only offer was made.

For capital gains purposes can a value be applied to the three 'free shares' and if so can indexation/taper relief also be applied?"

Calculating the capital gains on shareholdings is one of the most difficult exercises known to man (or woman!).

As you know, it's basically proceeds (here whatever you received from Schlumberger) less cost, and that harks back to the original cost of your Sema shares.

As you bought them in stages, the way the CGT system works is to aggregate the costs, keeping a running total of indexation, up until April 1998.

After that time, each holding is treated separately.

The free shares - which I think are "bonus" shares - simply increase the number of shares you held but don't alter the cost.

So instead of holding 100 shares which cost �200, you hold 400 shares which are still treated as costing �200.

You will indeed get taper relief on the shares.

There are different taper rates depending on whether the shares are business assets (such as shares owned by employees or unquoted shares) or other shares (such as a small holding in a quoted company you don't work for).

R Regan asks: "If two people each have a house and then get married, how long can they keep both houses before they have to pay tax when they sell one of them?"

The problem you have identified is that whereas each single person can have a house free of CGT through its being their main home, a married couple are only allowed one house between them.

Anyone - or any couple - who have more than one house should strictly tell the Revenue within two years which is the main residence and thus outside CGT.

If you then keep the second house, perhaps letting it out, the CGT clock will start to run.

You'll only have CGT to consider on a proportion of the time the house has been owned - basically the period when it wasn't your home, less the last three years of ownership.

There are also some lettings reliefs, so it may be that there is no significant CGT bill in the end.

The opinions expressed are John's, not the programme's. The answers are not intended to be definitive and should be used for guidance only. Always seek professional advice for your own particular situation.