Buying parents home - capital gains tax

Rodert

Hello,
I'm considering buying a house my parents buy to let property. I had a couple of questions related to capital gains tax for them, any help would be much appreciated.
The house has been valued by estate agents between 235k and 275k, they bought for 205k. If I pay the low end of market value at 240k do they need to inform the HMRC via the 'Post-transaction valuation check’ form or would this be accepted as market value? Does this form always need completing in sales to connected parties?
Finally when filling in the form they ask for evidence of valuation, will one of the estate agent valuations be accepted (the one who valued it 235-245k)?
Thanks for any help.

G_M

Rodert wrote: »

Hello,
I'm considering buying a house my parents buy to let property. I had a couple of questions related to capital gains tax for them, any help would be much appreciated.
The house has been valued by estate agents between 235k and 275k, they bought for 205k. If I pay the low end of market value at 240k

1) do they need to inform the HMRC via the 'Post-transaction valuation check’ form or would this be accepted as market value?
2) Does this form always need completing in sales to connected parties?
3) Finally when filling in the form they ask for evidence of valuation, will one of the estate agent valuations be accepted (the one who valued it 235-245k)?

1) The Post-transaction valuation check is voluntary.

"we offer a free service to help you complete your Self Assessment tax return. You can ask us to check valuations after you’ve made the disposal,"

Whether HMRC would agree the valuation they provide is impossible to foresee. If they don't, then
"we’ll informally suggest alternatives".

2) No. See above and link.

3) Perhaps, perhaps not. More likely they will want either several agents valuations or a formal Valuation by an RICS surveyor.

00ec25

as you correctly identify, you are a "connected person" so the price used for their CGT must be market value

HMRC have their own valuation dept (Valuation Office Agency - VOA) who review the market value your parents declare on their tax return and the VOA inform HMRC whether that value is "reasonable".

if the VOA disagree with "your" valuation then, and only then, will the quality of the evidence supporting your valuation come to bear. At which point you have the option to formally contest HMRC's view - which is where having a professional valuer on board may be useful in terms of credibility (but obviously at your expense in terms of paying them)

the CG34 is, as G-M says, a voluntary option to allow your parents to have forewarning of whether the VOA accepts the valuation before the actual tax return is submitted. It does nothing more than that - useful if you a heads up, but it is not a requirement since it legal standing is zero.

your parents are the ones required to submit a tax return using a realistic market value. Whether they think they can defend receiving the low end of one quoted valuation range is a matter only they and HMRC will know when the case comes before the VOA.

the fact you are paying parents at least within a quoted range is better than a made up number, but even if you get a professional valuer to do a formal quote, nothing is certain until the VOA decides. Hence the usefulness of a CG34.

I appreciate none of the above helps you decide how much you are actually going to have to pay your parents, so make sure you have something in reserve to cover any top up required.

GDB2222

If HMRC want a valuation, they will ask the district valuer. It’s only if they Significantly disagree with £240k that they will query it. At that point, you provide the estate agent valuation and hope for the best.