Capital Gains

Chris13_2

Hi,

In Aug 2000 my sister and i bought a property on a residential mortgage (in my name). Neither of us have ever lived in it, it has in fact been rented out to a tenant for the past 4 years.

Now the tenant has gone we wish to sell, though need to find a way of reducing Capital Gains Tax.

My sister and I went into the buy to let thing together, though the house and mortage are in my name only. As a result, we got something signed and lodged it with a solicitor to say we co own the property.

I pay 40% tax and my sister pays the basic rate. As well, for (some reason) i get given a self assessment each year.

We've made approx £100k in equity in 4 years. Can we re-mortgage to get a lump sum out? (Maybe pay for home improvements i.e. conservatory/ kitchen etc). This way reducing our capital gain?

Or, alternatively, can i sell it back to my sis for say £10k more than we paid for it then sell it under her sole name to pay just her Basic rate tax on the capital gains?

This property was my first. In 2003 I bought my own property to live in. Will Inland Rev presume that i lived in the first house as it was my only mortage at the time?

I've never had a buy to let mortgage on the first property

Are their any loopholes? Do the Inland Rev check with land registry?!

Cheers
???

johnllew

Can we re-mortgage to get a lump sum out?

Probably.

(Maybe pay for home improvements i.e. conservatory/ kitchen etc). This way reducing our capital gain?

The expenditure will only reduce the gain if it is used on improvements to the property you wish to sell. THe improvements will very likely increase the value of the property so your plan will be self-defeating.

Or, alternatively, can i sell it back to my sis for say £10k more than we paid for it then sell it under her sole name to pay just her Basic rate tax on the capital gains?

Any disposal between connected persons will have the market value imposed so no get-out here. Besides with that sort of gain, most of it would be taxable on your sister at the higher rate anyway.

In 2003 I bought my own property to live in. Will Inland Rev presume that i lived in the first house as it was my only mortage at the time?

Yes.

I've never had a buy to let mortgage on the first property.

So?

Are their any loopholes?

Perhaps - you'll need to seek professional advice.

Do the Inland Rev check with land registry?!

Yes. Don't try anything dodgy - it's just not worth it. After carrying out any legitimate avoidance, just pay up and be happy with your good fortune.