capital gains tax on selling property

Vincenzo

Thanks Silvercar. Very helpful.

I find it interesting that you can borrow up the value of a property when you let it. How is thi svalue established?

The property I am going to let is currently my main residence. I remortgaged in January and the mortgage val came out at £170k. I know I could have sold it for more - the lowest valuation from 4 estate agents was £195k last month. So conservatively, say £190k. Or perhaps I decided it is £200k???? Who is to say how much a proprety WAS worth?

silvercar

You are accounting to the Revenue for your income and hence the property value. You could put what you like provided you can back it up with evidence if queried. If you got investigated, the Revenue would make a judgement based on the evidence you supplied and any other info they had.

Tassotti

That's an interesting question.

Would the IR accept an estate agents valuation or must one obtain a surveyors valuation?

Not sure I agree with the accountant who said borrrow as much as possible and put some in high interest account. You will be paying more than you are saving.

silvercar

There is no rule that says you have to have a valuation done at the time of introducing the property to your BTL business. I would have thought you would pay a surveyor for a retrospective valuation only if you were in dispute with the revenue.

There are three cases:
a) the revenue accepts you valuation;
b) the revenue disputes your valuation, you produce anecdotal evidence and if still in dispute you pay for a surveyor's retrospective valuation to back up your case;
c) the revenue thinks you have fraudulantly inflated the property value and prosecutes you.

(c) is to be avoided. Anything between (b) and (c) could lead to the revenue doing a thorough investigation of all your affairs for the last 7 years, costing you accountancy fees and aggravation.

Tassotti

what would constitute the anecdotal evidence you mention in point b?

silvercar

sold prices of similar houses at the time you started the business, estate agents valuations less a bit? TBH I'm stabbing in the dark now, you would put forward whatever info you had and hope the revenue would accept your figures. If you'd only owned the house a short while, your price paid adjusted by a local HPI may help.

Tassotti

Seems a bit of a grey area that could cause problems in the future

Tass (off to rightmove to print out a few comparables )

silvercar

The only case that I actually know about is a more commercial one where a set of garages was converted into a shop twenty years ago. The business has now been sold but to finalise the accounts they have to agree the price of the building three years ago. Independant valuations have been produced but they can't get the Reveunue to agree. I think it is waiting for an appeal to a minister of state at the moment. In the mean time accountancy bills increase. and the revenue is charging interest on the tax it sees as unpaid, but won't have to be paid if they win the case.

PoorDave

pbradley936 wrote:

I think you are talking about taper relief but I have no first hand knowledge of that. I think it means you pay less the longer you own the investment. If you do not need the money in a hurry, you could sell one flat per year over the next three years and enjoy the allowance (currently £8800) on each one. If you are married you can also use your spouse’s allowance. The tax year runs April to April not January to December. You could rent out the others until you wanted to sell them. You might find that you prefer the income they bring in. With the amount of money involved I think you should speak to an accountant who will be able to give you advice tailored to your circumstances.

Doesn't using spouse's allowance only apply if the property is in joint names? I might be wrong.