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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hello again If I sell one of the properties to a friend and

Resolved Question:

Hello again
If I sell one of the properties to a friend and keep 25% in the property by giving them the deposit, from the sale, so they own 75%, how would this work?
Thanks
i.e.
bought 100
spent 50 on improvement
sell for 200 but give back 50 (25%)
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

I'll have a look at this and get back to you.
Expert:  TonyTax replied 2 years ago.
I don't see why you don't just sell a 75% share in the property instead. In that case, only 75% of the cost would be allocated against the disposal proceeds. Whatever you do, there is no getting away from that. A solicitor would draw up documentation that sets out the ownership percentages.

Unless your ownership of 25% was formalised HMRC would probably assume you had sold all your interest. Giving back 25% to the buyer would makes things messy in my opinion.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Unfortunately my friend needs to get a mortgage, so therefore he gets the 75% of purchase from a mortgagee and I leave the 25% in as the deposit.

From the mortgage point of view they will see it as one transaction with the deposit either coming from a "third party" or directly from me, pre sale.

We will definitely have something drawn up from a solicitor and put on the land title spelling this out

Expert:  TonyTax replied 2 years ago.
That explains things.

You can either sell 100% of the property to your friend and have the £25,000 secured on the property as a loan or sell 75% of the property and have yourownership of 25% documented. You will still have a gain if you sell 75%.
Customer: replied 2 years ago.

so to keep it simple

If I bought for 100 sell for 150 but loan 50 towards the purchase and document 25% still belongs to me, will I still have a gain at the time of sale?

Expert:  TonyTax replied 2 years ago.
If you sell 75% for £150,000, that 75% will have cost you £75,000 for the purchase and £37,500 for the improvement, you will make a gain of £37,500.
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