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bigduckontax, Accountant
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This may be a tax question but hopefully someone can answer

Customer Question

This may be a tax question but hopefully someone can answer it.
Hi
I've recently bought the BI off of my trustees with regards ***** ***** 'buy to let' properties I owned before going bankrupt.
I am out of my bankruptcy and may want to sell one of them now as I can't let it out as it now needs some serious work done to it but I don't have the money.
I bought the property over 13 years ago for £75,000. Around six years ago I re-mortgaged it for £240,000, before my bankruptcy. I paid around £8,000 to the trustees for the BI.
I can sell it for £250,000.
Will I be liable for CGT between what I bought it for and the sale price, as if I am I can't afford to sell it and I'm in a catch 22.
Thank you
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

You will be liable for CGT on the sale of these buy to let properties. Presumably you did not occupy them as your sole of main domestic residence? My answer makes that assumption, but please come back to me if you did.

Your gain will be 250K - 75K = 175K. Deduct your Annual Exempt Allowance of 11K leaves 164K taxable. The rate of tax will be 18% or 28% or a combination of the two rates depending on you income in the year of sale. Any improvements which you have made to the properties eg double glazing, installation of central heating, extensions, but not routine repairs which are offset against rental income as indeed can the interest element of the mortgage payments, will reduce that gain.

I do hope I have indicated to you your situation in this matter.

Customer: replied 2 years ago.

Thank you

Does it not make any difference that I was bankrupt and then had to buy back the BI?

Expert:  bigduckontax replied 2 years ago.

HMRC has the following advice regarding the position at bankruptcy:

'Although assets vest in the trustee on appointment, this does not constitute a disposal for capital gains tax purposes. If the trustee disposes of assets, any gains on disposal are liable to capital gains tax and the tax is payable as an expense in the bankruptcy, in due order of priority'

As you have effectively paid another 8K for your property then you can then knock another 8K from your liability..

Customer: replied 2 years ago.

Although that's not what I wanted to hear, I thank you for the fantastic answer as it has stopped me going down a path where I would of been liable for a huge CGT bill in a couple of years time and something I wouldn't of been able to afford. So thank you for spending the time and making it clear.

Expert:  bigduckontax replied 2 years ago.
Delighted to have been of assistance.
Please be so kind as to rate me before you leave the Just Answer site.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3612
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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