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We have various letting properties. Someone has offered to

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We have various letting properties. Someone has offered to purchase one of our residential flats with a view to changing it to commercial. They don't have the funds now so it would be our intention to let them pay it up over a certain period of time. We would be charging them interest annually on the remaining amount until they are in the position to pay the loan off completely. My 1st question is - would we be better to change the property to commercial ourselves and when would tax be due
Submitted: 6 months ago.
Category: Tax
Expert:  bigduckontax replied 6 months ago.

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

As my old boss was wont to say it doesn't alter the price of cheese. You will be liable for Capital gains tax (CGT) on the gain made on disposal less your non cumulative Annual Exempt Amount (AEA) of 11.1K plus Lettings relief (LR) up to 40K if you occupied the flat either before or after the letting period. Irrespective of how the capital sum is paid the CGT liability crystalises at and in the tax year of disposal. The interest forms part of your income for Income Tax (IT) also.

I am so sorry to have to give such gloomy news.

Customer: replied 6 months ago.
Is it not the case that if we change this property to commercial ourselves, before the sale, that we would pay less CGT.
Customer: replied 6 months ago.
Did you get my last question?
Expert:  bigduckontax replied 6 months ago.

Sorry, it would not make the slightest bit of difference.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3098
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 6 months ago.

Thank you for your support.

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