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bigduckontax
bigduckontax, Accountant
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I'm taking a 80% interest in a property. Currently its owned

Customer Question

I'm taking a 80% interest in a property. Currently its owned by 2 people 50/50 one of whom is moving out and ceasing to be an owner on the basis that the other owner inherits all the mortgage debt.
The 80% share is specified in a deed of trust although it doesn't specify the make up. The 80% is made up of 3 elements - 80% of the new mortgage loan, 100% of the penalty to redeem the pair's previous mortgage and legal fees and the offset of debts owed to me by the owner whose staying put. It will continue to be his main residence but not mine.
Will HMRC take all these elements into account in determining any capital gains tax liability of mine when the property gets sold in future years. If it doesn't then my gain will be larger than it should be?.
What's concerning me is that my solicitor in preparing the Stamp Duty bill for me seems to be basing it not on the 80% but on the lesser half share of the departed owner's redeemed mortgage. As an alternative he has suggested including the redemption penalty that I paid for the pair, but this is still shy of my 80% share because the historic debt to me is not being counted. I know that this will lessen my Stamp Duty bill now, although the new rules on 2nd homes make this horrendous anyway, but if I declare an 80% interest upon eventual disposal the two tax returns (SD and CGT)won't tally.
Submitted: 2 months ago.
Category: Tax
Expert:  bigduckontax replied 2 months ago.

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

Customer: replied 2 months ago.
I
Hello.Thanks. I await your answer with interest.
Expert:  bigduckontax replied 2 months ago.

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

The SDLT is based on the consideration paid in the transaction. I would be inclined to leave that in the hands of your solicitor.

Any Capital Gains Tax (CGT) liability on ultimate disposal will be calculated on any gain made. This is the difference between the acquisition and the disposal price. The acquisition price is the cost of the property plus purchase costs including SDLT plus any improvement eg installation of double glazing, central heating or extensions. The disposal price is net ie after deducting selling costs including advertising. The gain 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. You have a non cumulative Annual Exempt Amount (AEA), currently 11.1K to offset this gain and if you have occupied the premises and then let them out then Lettings Relief (LR) up to 40K may be available also [unlikely].

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

Customer: replied 2 months ago.
Hello Keith
I already know the generalities of the law as you've answered, but this does not answer my specific questions. My questions were in respect whether the elements that make up my the purchase price/ consideration would be accepted by HMRC rules as the legitimate purchase price in respect of stamp duty and eventual CGT.
My solicitor was the one who suggested getting the view of a tax expert, so please respond to my questons.
Please answer these.
Thank you
Expert:  bigduckontax replied 2 months ago.

I have opted out of this question.

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