Selling house with cashback tax implications

oilburner_2

Hi all,

I am selling a house I have been renting out and so will have to pay capital gains when it sells
I have had an offer on the house but they are saying they can only buy if I artificially inflate the selling price by £3000 and then give them the £3000 back as a "cash back" on completion.

My question is will I have to pay capital gains on the extra £3000 or as the estate is advising I will only pay on the true selling price?

Any help appreciated

ILW

Sounds like mortgage fraud to me, I wouldn't count of it going to completion.

TrickyDicky101

There's a reason why intelligent people don't normally go to Estate Agents for tax advice...

Although, specifically to answer your question, depending on your circumstances and those of the property, the available reliefs open to you may reduce/eliminate any CGT you have to pay even with this artificial increase in selling price. But that doesn't mean it ain't fraud as ILW stated.

JQ.

ILW wrote: »

Sounds like mortgage fraud to me, I wouldn't count of it going to completion.

Sounds like that to me too. They obviously can't afford the house, so if you accept the offer be prepared for the deal to fall through at some stage. I suspect both your solicitor and their solicitor may have issue with being complicit in fraud.

ItMightBeUsefulOneDay

It's a scam. This is how it works.

You agree to add £3k to the price and give it back on completion. Part way through the sale when things are well under way (before exchange) they call up to say that they need that £3k now or they'll pull out. Most people would tell them to take a hike. However for the few that agree it's £3k easy money for the scammer who is never seen of again.

silvercar

Vendor gifted deposit. Perfectly legal if it is declared to solicitor and lender. Some mortgage lenders won't accept it. It relies on the valuation coming in at the higher figure.

As far as CGT is concerned its a legitimate expense of the sale, so you would show the higher price and include the cashback in the expenses of the property.

All assuming it is declared. If it is cash in a brown envelope then it is mortgage fraud, well dodgy and not allowable as a CGT expense. Obviously.

oilburner_2

silvercar wrote: »

Vendor gifted deposit. Perfectly legal if it is declared to solicitor and lender. Some mortgage lenders won't accept it. It relies on the valuation coming in at the higher figure.

As far as CGT is concerned its a legitimate expense of the sale, so you would show the higher price and include the cashback in the expenses of the property.

All assuming it is declared. If it is cash in a brown envelope then it is mortgage fraud, well dodgy and not allowable as a CGT expense. Obviously.

Hi I have now spoken to my solicitor and it is all above board. it is exactly as you say silvercar

thanks to all for the replies

Richard_Webster

Hi I have now spoken to my solicitor and it is all above board. it is exactly as you say silvercar

thanks to all for the replies

It may be above board and declared on the paperwork but it doesn't necessarily follow that the buyer's lender will accept it - it may simply reduce the buyer's mortgage offer accordingly.

A few years ago, when lenders were irresponsibly throwing loans around, they would nod and wink at this and quite inexplicably would accept "allowances" when they didn't accept price reductions even though they were really the same thing. Now they are not so gullible.