CGT on Dads property - Sale to family member market value?

Jac96

Hi, 
I am looking to purchase my dad's rental property. He has made a large gain as he purchased this house in the '90s. He has offered to sell it to me below market price but we are concerned regarding how HMRC will value the sale. I think the sale price for CGT purposes will need to be the market value of the property, because we are related, which will, of course, result in a higher capital gain than he would actually be making. The discount he wants to give to me is the same value the property is valued at by an instant house purchase company, do you think we could use this value for the CGT submission? Or will HMRC require we use the value of the house on the open market? 

Thank you for any help, 

AdrianC

CGT in a "connected parties" sale will be at market value, yes.

An "instant purchase" company is, by the very definition, below market value. That's how they make their money.

[Deleted User]

HMRC are very hot on this. When you put in your declaration ( gains have to be reported quickly) it asks who house is being sold to ( ie open market or friend / relative ) They do their own checks to decide if the valuation declared is a true open market value. 

Otherwise loads of people could just declare any old low value to avoid CGT 

dimbo61

What condition is the property in ?
Are you buying it to live in or as an Investment property ?
Does it need lots of money spending on it to make if ready for renting ?

macman

dimbo61 said:

What condition is the property in ?
Are you buying it to live in or as an Investment property ?
Does it need lots of money spending on it to make if ready for renting ?

None of which has any relevance to it's valuation for CGT purposes, which is payable by the vendor, not the buyer.

Wkmg

macman said:

dimbo61 said:

What condition is the property in ?
Are you buying it to live in or as an Investment property ?
Does it need lots of money spending on it to make if ready for renting ?

None of which has any relevance to it's valuation for CGT purposes, which is payable by the vendor, not the buyer.

Surely condition and expenditure required are very relevant to value. If there are 2 identical houses in the same place but one just burnt down and the other didn't surely they'd have different values and therefore different cgt liabilities?

macman

Yes, which is precisely what the market value will determine. A burnt-out shell and a house in perfect condition are clearly not 'identical houses'. 
The OP was asking if the vendor can get away with submitting a below-market valuation-which they cannot.

Wkmg

macman said:

Yes, which is precisely what the market value will determine. A burnt-out shell and a house in perfect condition are clearly not 'identical houses'. 
The OP was asking if the vendor can get away with submitting a below-market valuation-which they cannot.

And you were quoting a response that said "What condition is the property in ?" and then claimed that was an irrelevance. It clearly isn't. The market value is heavily dependent on the condition.

AdrianC

I s'pose setting fire to it would be one way of saving on CGT...

Wkmg

AdrianC said:

I s'pose setting fire to it would be one way of saving on CGT...

Do you pay CGT on insurance payouts...?

Jac96

Thanks for the reponses guys. 
So lets say an identical house next door is worth 125,000
Purchase price say 100,000. 

My dad would have to submit the gain using the OMV 125,000 as S.P. 

What happens when I come to sell the house? (If it was only my main residence for a couple of years and then an investment property) 
Would my purchase price for CGT purposes be 125,000, even though I only paid 100,000? Surely HMRC wouldn't double count the 25,000 difference?