Capital Gain Tax on Property Sale

jon52

Hi,

I am just wondering if anyone can help with answering some of my question. Property privately sold, no estate agent involved. Property was sold with a value roughly obtained from rightmove website. The buyer did get a mortgage hence a valuation was required. Mortgage valuation came out exactly the figure sale was agreed on. I am just wondering if I am correct to base the capital gain on the mortgage valuation when paying capital gain tax or does it need another separate valuation? Thank you.


Regards

uknick

I'm obviously missing something but, why not use the sale price? Or, did you sell it to a related party for below market value? In which case market value must be used.

jon52

Hi,

Thank you for the reply. In my opinion the property was not sold below market value (at least not to our knowledge). However, what is the market value ? My search on google usually says get a valuation from estate agent or surveyor. in this case, no estate agent was involved. We simply use the closest value for the like for like property on the same block from rightmove. That's why I am unsure if the sale price is indeed market value in the eyes of taxation and/or if the mortgage valuation is acceptable. Thank you again.

Best Regards

00ec25

if the person you sold it to is not related to you and thus does not fall within the "connected person" definition, then the CGT is calculated on what you actually sold it for


valuations are irrelevant.


The taxable gain is from what you paid to buy it, to what he paid to buy it from you.

jon52

Thank for the respond. I was unaware of the concept of "connected person". However, a quick google did point me to a somewhat correct direction. I am not sure if I am connected person or not, buyer is my former partner (relationship wise). I also own a few property with the buyer (not the property in question). Does that make us business partner ? if we are considered business partner, we would then be considered connected person (so I have read). Any help is appreciated. Thank you.

00ec25

read:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14580

I think you are trying to apply the word "partner" in the wrong context. It does not mean who you used to sleep with,


It would be very rare for your property owning business to be undertaken as a partnership in the sense you have read about it - ie a formal partnership where you are running a business governed by a formal written partnership agreement that files formal partnership accounts and pays tax accordingly .

tebthereb

I thought that as well as connected party transactions being necessarily calculated at MV it was also necessary to apply MV when there is a transaction between unconnected parties where the transaction is not at arms length (s17)?

Having said that it sounds like the OP has made a sale approximate to MV. There is nothing in law that requires a valuation from a particular source so the OP should retain records of what they have based their sale price in. This will help their defence in the unlikely event of HMRC asking questions.

HMRC could of course refer to the DV for a valuation which could differ but from the OP it sounds unlikely that the DV would come up with something much different.

Money_Grabber13579

tebthereb wrote: »

I thought that as well as connected party transactions being necessarily calculated at MV it was also necessary to apply MV when there is a transaction between unconnected parties where the transaction is not at arms length (s17)?

Having said that it sounds like the OP has made a sale approximate to MV. There is nothing in law that requires a valuation from a particular source so the OP should retain records of what they have based their sale price in. This will help their defence in the unlikely event of HMRC asking questions.

HMRC could of course refer to the DV for a valuation which could differ but from the OP it sounds unlikely that the DV would come up with something much different.

Correct. HMRC could seek to challenge the valuation if they believe it not to be a transactions made at an arm’s length price however, as long as the value applied is equivalent to similar properties of the same size and time of sale etc, that should be enough of a defence in the event of an HMRC challenge.