Capital Gains Question

Jello123

Hi All

I was wondering if anyone can help me work out what CGT I will be required to pay. My situation is slightly unusual.

The property is question was a family home, where by I lived 25+ years of my life. It was original a council property, which my parents bought under the right to buy scheme. They then “sold” it to me approximately 5 years ago. When they “sold” it to me, they sold it for the value of the remaining mortgage. Which if I recall was approx £67k. The house was worth much more than that. The exact value I wouldn’t know. I would assume it was £150k+.

After I “bought” the house, we still lived there as a family for a two more years. It is at this point I moved out and bought a house for myself and my wife and kids. I left the old house with my mother and my elder brother in it. He continued to pay me a small ammount to just cover the mortgage payments.

My mother and brother lived like this for 3 years now. But we have decided to sell up now.

Current valuations tells me that we will get £180,000 for the property.

As it was originally our family home, I plan to split the equity between all my siblings. But I want to ensure I deduct CGT correctly before giving everyone a share, for the fear that the tax man will come looking for t from me in the future if not done correctly now.

Will what I owe in CGT be effected by the following facts:
1) It was my only and main family home for the best part of 25 years
2) When I bought it from my parents I got it for what they had left on the mortgage, and not the market value (effectively I was gifted the equity)
3) No real improvements took part in the house except maybe a maximum of £3k worth (replaster 3 rooms and new boiler)

Many Thanks

Pennywise

See some initial comments below:-

Jello123 wrote: »

Will what I owe in CGT be effected by the following facts:
1) It was my only and main family home for the best part of 25 years Irrelevant - your CGT position is based on your period of ownership only
2) When I bought it from my parents I got it for what they had left on the mortgage, and not the market value (effectively I was gifted the equity) CGT is based on market value between connected persons - the amount "paid" is irrelevant
3) No real improvements took part in the house except maybe a maximum of £3k worth (replaster 3 rooms and new boiler) Irrelevant as they're repairs/like for like replacements, not improvements.

Many Thanks

BoGoF

An expensive lesson on why this was a bad idea from day one.

Jello123

Hi what do you mean?

My parents were unable to continue having a mortgage on the family home as they were getting too old.

It was our family home, so naturally one of us siblings decided to “buy” the property so we can continue living in it.

Without loosing the house, what was our other option?

Jello123

Thank you.

Is there anyway to find out what the market value was when I purchased it?

Mojisola

Jello123 wrote: »

When they “sold” it to me, they sold it for the value of the remaining mortgage. Which if I recall was approx £67k. The house was worth much more than that. The exact value I wouldn’t know. I would assume it was £150k+.

If either of your parents need residential care, they will be assessed as having given away £90k+ and so not eligible for council paid care.

00ec25

Jello123 wrote: »

Thank you.

Is there anyway to find out what the market value was when I purchased it?

2 options:
1. Pay a professional valuer - ideally a Chartered Surveyor who specialises in valuations


or


2. DIY by undertaking extensive research to assemble written evidence of actual prices PAID for identical or very similar properties to yours within a reasonable distance.


At the end of the day HMRC will check whatever valuation you use, if it ends up in front of them. You don't want it to be so wrong that they then question if you are attempting to deliberately misrepresent your tax position.

Jello123

Pennywise wrote: »

See some initial comments below:-

Do you happen to know how the Private Residence Relief works at all? And would it apply for me at all?

00ec25

Jello123 wrote: »

Do you happen to know how the Private Residence Relief works at all? And would it apply for me at all?

PRR exempts the time period you lived there as your only/main home + final 18 months of ownership.
The period after you moved out is not exempt, but may partly overlap with the final 18 months
as you have found the words, why not read helpsheet hs283 as it explains what they mean
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet

NOTE carefully - CGT applies to when you were an owner, That started the date your parent made you an owner, not 25 years previously