Establishing market value for CGT purposes

pjcox2005

Hi all,


Looking for some advice - currently own a second home which was bought with the sole intention to rent to a family member for a period, whilst they save up a deposit and become in a position to get a mortgage in order to buy it off us.


The sale price for when they do is pre-agreed as we're not looking to make a significant profit, more just recover any costs and the loss on return due to having the deposit tied up. As such when we come to sell it will be below market value.


Appreciate and always have known that for CGT this will be a disposal at market value. We're now getting to a point of thinking about that in 12 months time, and the Zoopla price (best I've got and probably on the low side) has gained quite a bit and now ticked into a value that shows a small gain after annual exemptions and qualifying capital expenditure to be deducted.


I know we'll need to submit a CG34 post-transaction to get an agreed valuation, but I'm wondering how much info is needed for this and how bullish you can be:


- Is it a case I need a professional valuer or can best estimates/Zoopla/estate agent pricing etc work?
- Are things such as ready buyer, quick sale, and no estate agents fees taken into account as an acceptable reason why the valuation would be lower to a certain seller?
- Effectively there would be an issue of "evicting" a tenant if we were to sell to third party so does that factor into price.


Just trying to understand how HMRC approach this as any gain would probably be passed to the family member given they're the ones who benefit from the uplift so it may impact the timing of a sale. Anything to reduce this helps as it will be their only residence so exempt if they had bought it originally (i.e. at the original low price) and then dispose of it later.


Thanks in advance for any help.

Keep_pedalling

You should get a RICS qualified valuation if you don’t want to risk an HMRC challenge.

pjcox2005

Keep_pedalling wrote: »

You should get a RICS qualified valuation if you don’t want to risk an HMRC challenge.

Thanks, presumably it's one of those that without a valuation survey then HMRC will just red flag it and are more likely to challenge.

00ec25

are you certain you will be selling to a "connected person"?
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14580

without a professional valuation to support your CG34 you may as well use the form as toilet paper instead.
The point of the exercise is that your valuation must have the same or more credibility as that which the Valuation Office Agency will come up with.

Obviously human nature being what it is if the VOA see a valuation down by a RICS registered valuer (willing to go to Tribunal if needed) they will be more inclined to think that person has done a "proper" job on valuing it and it will be a lot easier to just accept their figure than go to all the effort of trying to work out a VOA figure to contest it with
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg16603

pjcox2005

00ec25 wrote: »

are you certain you will be selling to a "connected person"?
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14580

without a professional valuation to support your CG34 you may as well use the form as toilet paper instead.
The point of the exercise is that your valuation must have the same or more credibility as that which the Valuation Office Agency will come up with.

Obviously human nature being what it is if the VOA see a valuation down by a RICS registered valuer (willing to go to Tribunal if needed) they will be more inclined to think that person has done a "proper" job on valuing it and it will be a lot easier to just accept their figure than go to all the effort of trying to work out a VOA figure to contest it with
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg16603

Yep, wife's brother so definitely connected.


Factoring in a valuation then next year, presumably as it's not an exact science there is then a little flex in the approach taken. A bit like valuations for mortgage purposes where valuers rarely state it's above the mortgage price.


Do you think it's possible to kill two birds with one stone in that any mortgage provider will require a property valuation (although often on a lower scale) so that valuation, particularly if we requested and paid for a full valuation, could be used for both purposes?


Thanks all, as ever with tax it's the final application and practicalities that take a bit of understanding.