Capital Gains Tax

kelly1957

Hoping for some advice here. Purchased a property that needed refurbishment with the intention of renovating and selling to our son for no profit. Now the tax man wants 40% of the gain although no gain was made. Apparently they take the market value of the property as it was at time of sale to our son and not what we sold it to him for. We are not allowed any capital gains allowances as we sold our small business using the 'tapering relief' tax advantages in the same tax year. My question is, as it is my son that has clearly benefitted purchasing a property at below market value could the gain not be said to be his rather than ours as we have received no financial gain from this transaction whatsoever, in fact have made a loss. This all seems grossly unfair, I realise we were naive at the time but, as I said before, this was a nil profit transaction and didn't realise there would be such implications in simply helping out our son.

Lyndsay101

Sorry.. unfortunately HMRC are correct to ask for the tax.. there is a gain based on the market value of the house less what you paid for it, regardless of the cash you received.

Its a real shame you sold in 2007/08 at 40% tax rather than 18% now.. how long did you own the property for? What was the property?

What you are referring to by passing the gain to your son is Gift Relief, which is only available for gifts of business assets .

If you struggle to find the cash to pay the CGT bill you may wish to consider paying CGT in installments, over up to 10 years, although interest would be charged on the outstanding balance.

roger_c

Have to agree with Lyndsay here unfortunately, but remember you can deduct your own cost of the property together with capital refurbishment costs (unless these have been deductible for income tax purpose, say if you rented out the property), you can also deduct legal fees and depending on the dates you purchased and then sold/transferred title to your son you may also be entitled to some non-business asset taper relief on the gain. But, more info needed really to tell you anything more.

kelly1957

Many thanks for your answers, looks like we're going to have to pay up, still seems very unfair though, having to pay tax on income earned is one thing but paying it on nothing is something else.
Will never be so naive again, just wish we had the knowledge that clearly some of you have!

Debt_Free_Chick

kelly1957 wrote: »

Many thanks for your answers, looks like we're going to have to pay up, still seems very unfair though, having to pay tax on income earned is one thing but paying it on nothing is something else.

I can see what you're saying but, effectively, you have given your son a gift of the difference between what you sold it to him for and what it's real value was i.e. if you had sold to a stranger.

The HMRC view is that you can not do this and gain a tax advantage i.e. avoid CGT so they treat the gift as if that was part of the price you sold it for. So if you gave him a £50k discount, it's as if he paid that for the property, but you gave it straight back to him.

Sorry