How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask TonyTax Your Own Question
TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
13905389
Type Your Tax Question Here...
TonyTax is online now

my husband and my mum own a property jointly which has been

Resolved Question:

my husband and my mum own a property jointly which has been renovated is is sold subject to contract. I have been pushing to get the property sold in this tax year so they can make use of the CGT Allowance, however it looks like the sale isnt going to happen before the tax year end.
Would it be possible to sell the property to a property investment company recently set up by my mother and I (Both directors) for the market value to make use of the CGT Allowance for 2013/14 and then sell it to the interested party in 2014/15 tax year from the company, making no profit.

Many thanks
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you tell me how long you have owned the property and over what period the renovation was done please.
Customer: replied 3 years ago.

Hi


We have owned it for 3 years and the renovations were done over 2 years. We stand to make a profit of £19000 total on the transaction.

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 3 years ago.

sorry forgot to say it is neither my mums or husbands place of residence.

Expert:  TonyTax replied 3 years ago.
OK, thanks.
Expert:  TonyTax replied 3 years ago.
Hi again.

Whilst the property has been owned for three years and the renovation work has taken place over two years, it is possible that HMRC will assess any profit you make to income tax and national insurance contributions on the basis that they may consider you are trading as property developers, ie buying property, adding value and selling it on for a profit. If the property has been let, that might change things a little but, given that the renovations took two years, I doubt that is the case. I'm not saying that HMRC will even query the disclosure of the profit as a capital gain but it is a possibility especially if you have a history of doing this type of thing and you are involved with a property company.

There is nothing to stop you selling the property to your company at market value so that you realise the gain in 2013/14, though you don't have much time to exchange contracts by 5 April 2014 and you ought to discuss it with your solicitor and consider the effect that this may have on your buyer. People get very anxious this close to a property sale and anything out of the ordinary could cause problems. HMRC would impose market value as your disposal proceeds as you are connected to the company.

A subsequent sale by the company at the purchase price would mean the company would make no profit. I cannot think of a reason why there would be a legal problem caused by the wording of the Memorandum and Articles of Association of the company with that but you might also discuss this with your solicitor too.

You should be aware that there may be a stamp duty charge due to your connection to the property company as you can read under the heading "Transferring land or property to or from a company" here.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.

Thank you for the prompt reply, which is very helpful. You mention exchanging contracts by 5th April. If the original buyer can exchange by the 5th does this mean I can include the transaction in 2013/14 although the sale is exchanged and not completed.


 


Thanks


Karen

Expert:  TonyTax replied 3 years ago.

That's correct.

 

The tax point for Capital Gains Tax in relation to a property transaction is the date that contracts are exchanged unless the contract is conditional. See page CGN15 here. You may also find the notes here useful.

TonyTax and other Tax Specialists are ready to help you

Related Tax Questions