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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 5607
Experience:  FCCA FCMA CGMA ACIS
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Bought a property for 40000 which was below the market

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Bought a property for 40000 which was below the market value. Property was valued at 65000. I then spent 21000 pounds trying to get repossession of it because the vendor took me to court to say they sold it for less than they should have. Spent another 10000 in improvements. I am now selling it at 118000. How much capital gains tax will I need to pay if my income is 46000 pounds

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

Is this your sole or main domestic residence?

Customer: replied 7 months ago.
No
Customer: replied 7 months ago.
http://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/ it says that did the person sell you the house cheaper to help you. This is what I am confused about

Your gain is 118K - 40K - 21K = 57K. Now deduct your non cumulative Annual Exempt Amount (AEA) of 11.3K leaves 45.7K exposed to Capital Gains tax (CGT) at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. In your case it will all be taxed at 28% so you are facing a tax bill of a tad under 13K. Don't worry about the Gov UK Web Site as the vendor sold it to you under priced, more fool him!

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

Customer: replied 7 months ago.
it's 118-40 and not 118-65?

Your acquisition cost includes the legal fees you had to spend in order to obtain possession.

Customer: replied 7 months ago.
I mean it's not 118 - 65 which was the value of the house (as asked in the gov website) - 21 for possession - 10 for improvements - the legal cost of buying such as survey and legal fees - legal cost of selling (5)?
Customer: replied 7 months ago.
I am trying to reduce it as much as possible, but legally obviously

The gain is the difference between the acquisition price and the net selling price. We have established the purchase price, but there are the buying costs which you have not quoted and the selling price is net after deduction of selling costs including advertising. However there is a snag which I have just noticed. It would appear that you are liable to Kuwait tax at 15%. However, under the Double Taxation Treaty between the UK and Kuwait, this is allowed as a tax credit against any UK liability on the same transaction.

Customer: replied 7 months ago.
I understand that but if the gov website is asking the question "did the seller sell you the property cheaper than the market price and then goes on to ask what was the market value, when I enter the market value price it reduces the CGT value dramatically. My question is if the official gov website is asking that question, why are they asking it. This is the basis of my confusion and why I contacted you.

If they are asking you for the information then play the daft laddie and tell the Department what they want. If it reduces your CGT bill all to the better.

Customer: replied 7 months ago.
Lol, if I play the daft laddi is it considered tax avoidance or evasion? I've heard one is allowed and the other is a crime.
Customer: replied 7 months ago.
Because I can obviously play due to the ADVISE on the government website!

But it is neither, they are asking you to do it so comply; then emulate Brer Fox, 'For he lay low and say nuffin.'

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 7 months ago.
Thanks big duck. I will see what I can do.

Thank you for your support.

Remember HMRC told you to do it!