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TonyTax
TonyTax, Tax Consultant
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Me and my brother recently sold our commercial property, an

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Hi,Me and my brother recently sold our commercial property, an Indian Takeaway with 1 Bedroom to let, we both bought the property for £185,000 but has now been
sold for £515,000. The Tax free allowance is 105,000 each for us (92.5 + 12.5 CGT free allowance) I believe.Now brother wants to take £190,000 and not re-invest and I want to re-invest. So I told him to take £105,000 only from the proceeds if £515,000 and I take the rest, £410,000, and give him £85,000 to make it £190k. This way all CGT liability falls on me which is fine as I want to re-invest and defer to CGT.I want to know can I use whats left of my ammount (£325,000 after I pay him) to get a Buy to Let and defer/roll over CGT payment to that property?Thanks for your assistance.
JA: When was the property or asset sold?
Customer: 2 weeks ago
JA: Anything else you want the Accountant to know before I connect you?
Customer: No. thank you

Hi. My name is Tony. I'm looking at your question now and will post my answer or ask for more information here in a short while.

Customer: replied 5 days ago.
Also is there an issue with the way we are splitting the Proceeds? I am taking a larger share although we both invested 92.5k each when we bought the property. I can justify it if required as I have been the only one maintaining and paying the Mortgage on it.

Thanks Tony, look forward to your response.

You should qualify for entrepreneurs' relief on that part of the gain from the sale of the business which will limit your CGT rate to 10%. See HS275 here. ER cannot be claimed on the gain on the flat.

 

Assuming the property was jointly owned, you cannot divide the sale proceeds in the way you describe so that you can claim your brother's deferral allowance. In any event, you cannot defer a gain by investing in a buy to let property. You can only defer a gain by investing in business assets and buy to let isn't classed as a business asset I'm afraid. A furnished holiday let may qualify. See HS290 here.

 

I hope this helps but let me know if you have any further questions.

Customer: replied 5 days ago.
Thanks for the answer. The Indian takeaway was stopped for 1 year as we was looking to sell. Also the whole property was classed as a Commercial Property and not split up as Business premises and 1 bed flat separately. Will we still be able to get ER on ground floor which was used for Business and assume is half the value of property? Also since it was classed as a commercial property would there be a chance the whole property can get ER relief on gains?

Thanks for your guidance.

You can try and get ER on the whole property but I don't think HMRC will accept such a claim on the flat regardless of the whole property being classed as commercial.

TonyTax and other Tax Specialists are ready to help you

Thanks.