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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I own a property that I've owned years. I lived there

Customer Question

I own a property that I've owned for 14 years. I lived there up until 3 1/2 years ago. I want to sell the property to a relative of mine for a good price. I won't be having the property professionally valued but there it's on an estate where the is a lot of similar houses and a fair turn over of stock so we have a good idea of what the value is.My question is I don't want to have any problem with HMRC saying that I'm avoiding CGT on the property by selling it at a low price to a relative. There is actually very little as in one or two thousand pounds of CGT to pay because I lived at the property for so long. I have read on the HMRC site that they give notional values to assets that you sell to catch people selling things cheaply and to me with property there will always be a range of possible values that they could apply. How can I find out the range of values HMRC would accept for this property to be sold at or in fact if they do have a definitive value which they calculate how do I find that out.Clearly I don't want to cause a problem for myself with HMRC but at the same time I want to sell the property to my relative for a good price.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

If there is any dispute as to the market value of your property the matter will be resolved by the Valuation Office Agency (VOA), part of HMRC staffed by Chartered Surveyors. VOA's main function is assessing bandings for Council Tax or ditto for business rates, but they are also advised of all transactions in landed property and thus have an excellent database of values.

You say that you did not live in the house for some 42 months. Was it let out during that period. Once I know this I can advise you further.

Customer: replied 1 year ago.
No I let another of my relative live there for free.
Expert:  bigduckontax replied 1 year ago.

For the last 18 months of ownership you are deemed to be in occupation even if this is not the case so for 24 months you were not in occupation as the premises were let at a peppercorn rental. Total ownership period is 168 months so 24 / 168 [14%] of any gain made on disposal will be taxed at 18% or 28$ or a combination of the two rates depending on your income including the gain in the tax year of sale. From this proportion you can deduct 11.1K (Annual Exempt Amount (AEA) to reveal the gain exposed to Capital Gains Tax (CGT). ,The gain is the difference between the net selling price ie after deducting sales costs and the acquisition price. The latter is the purchase price plus the purchase costs including stamp duty land tax plus any improvements eg installation of double glazing, central heating, extensions, but not routine maintenance. All in all your exposure to CGT is likely to be small.

I do hope my reply has been of assistance.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3712
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 month ago.
This is a follow up question but please treat it as a new question.I have had the house professionally valued. I'm not working out the capital gains tax to pay and I've noticed something from the online calculator I've used that I would like to ask a question on.http://taxtool.co.uk/I've let my ex live there with no rental payment or contract since 06/2012 and I'm selling it on 06/2017 so 60 months. I checked the option that said the property was rented as I didn't live there and part of the calculations showed about 40k of "Letting relief". If I uncheck the was the property rented option then the tax due falls to zero.So my question is has the property been "rented" as far as the tax man is concerned as so am I entitled to this "Letting relief" ?
Expert:  bigduckontax replied 1 month ago.

If yiu have let the property then Lettings Relief (LR) may apply, but you will have to have occupied the premises either before or after the letting priod. If no rent has been paid then there is no relief.

Thank you for your support.

Customer: replied 1 month ago.
Ok thanks, ***** ***** occupied it from purchase to 06/2012. So does that mean I have to pay the £40k on top of the capital gains tax of around £9k ?Purchase price : 275000
Selling price : 710000
Commission : 0
Solicitors fees : 1500
Improvement works : 0Purchase date : 31/05/2002
Contract Exchanged : 01/06/2017
Date moved out : 01/06/2012Months rented : 60Net profit : 433500
Estimated tax : 9,027
Expert:  bigduckontax replied 1 month ago.

No, LR is a relief not a charge, but if there was no rental received then there is no relief.

I am a diabetic and must eat, I will be back to you soon with a ball park computation.

Customer: replied 1 month ago.
Ok please add this as a new question to pay for, I'm not sure how to do that.On sale I now need to repay a mortgage of £580k and also the calculator wouldn't allow me to put in the agents commission on the original purchase in 2012 which was around I think £6k
Expert:  bigduckontax replied 1 month ago.

Mortgages do not come into the CGT computation. Only 14% of the gain is exposed to CGT as I told you. 14% of 433.5 is say 61K. Now deduct AEA at 11.3K leaves say 49.4K exposed to CGT. A worst case scenario is a tax bill of say 18.3K. The gain is taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. If you could get away with 18%, which seems unlikely, then the bill would fall to close to your figure.

I do hope that you have found my reply of assistance.

Expert:  bigduckontax replied 1 month ago.

Thank you for your excellent support.

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