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Capital gains on off plan flat
K_Khan
Posts: 5 Forumite
in Cutting tax
Hi MSE Forum
Scenario:
I have invested money in an off plan flat. The block of flats has started construction and is due to finish construction in two years time. The flat I have invested in is currently valued at £200k. I have exchanged contracts with the developer at which point they asked me to pay a 10% deposit (£20k).
One year on I decide to sell my exchanged contract as I no longer want to buy the flat. The flat is now worth £210k so I sell my contract for £21k (10%). This earns me a £1k profit on disposal of this contract.
Question:
Do I have to pay capital gains tax on the £1k assuming I have used up my tax free allowance.
Many thanks
K
Scenario:
I have invested money in an off plan flat. The block of flats has started construction and is due to finish construction in two years time. The flat I have invested in is currently valued at £200k. I have exchanged contracts with the developer at which point they asked me to pay a 10% deposit (£20k).
One year on I decide to sell my exchanged contract as I no longer want to buy the flat. The flat is now worth £210k so I sell my contract for £21k (10%). This earns me a £1k profit on disposal of this contract.
Question:
Do I have to pay capital gains tax on the £1k assuming I have used up my tax free allowance.
Many thanks
K
0
Comments
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Didn't realise you could sell an exchanged contract, let alone make a profit on itIf you are querying your Council Tax band would you please state whether you are in England, Scotland or Wales1
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People sell their place in the queue for hard to get cars. It will depend on how the agreement is expressed, but as there is an underlying chargeable asset, any profit will be a chargeable gain. There may also be stamp duty issues.1
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K_Khan said:Hi MSE Forum
Scenario:
I have invested money in an off plan flat. The block of flats has started construction and is due to finish construction in two years time. The flat I have invested in is currently valued at £200k. I have exchanged contracts with the developer at which point they asked me to pay a 10% deposit (£20k).
One year on I decide to sell my exchanged contract as I no longer want to buy the flat. The flat is now worth £210k so I sell my contract for £21k (10%). This earns me a £1k profit on disposal of this contract.
Question:
Do I have to pay capital gains tax on the £1k assuming I have used up my tax free allowance.
Many thanks
K@k_khan
- Whether you can sell prior to completion will depend upon the contract. Some developers will bar buyers from selling before completion, or place onerous restrictions on any sale which make it unviable.- afaik, the 'profit' from flipping off-plan properties prior to completion is the gain in property value, so £10k in this example. I'm not an accountant but afaik the investors I've seen do this do have to account for CGT.I am a Mortgage Adviser - You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
PLEASE DO NOT SEND PMs asking for one-to-one-advice, or representation.
1 -
That would be if the transaction had to be categorised as a sale at £210,000 and a purchase at £200,000, which is why I said it depends on how the agreement is expressed. That is more a matter for a solicitor.1
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Jeremy535897 said:People sell their place in the queue for hard to get cars. It will depend on how the agreement is expressed, but as there is an underlying chargeable asset, any profit will be a chargeable gain. There may also be stamp duty issues.
I know my questions aren't tax related, but I just wonder if the OP's scenario is feasible.If you are querying your Council Tax band would you please state whether you are in England, Scotland or Wales1 -
lincroft1710 said:Jeremy535897 said:People sell their place in the queue for hard to get cars. It will depend on how the agreement is expressed, but as there is an underlying chargeable asset, any profit will be a chargeable gain. There may also be stamp duty issues.
I know my questions aren't tax related, but I just wonder if the OP's scenario is feasible.1 -
K_S said:K_Khan said:Hi MSE Forum
Scenario:
I have invested money in an off plan flat. The block of flats has started construction and is due to finish construction in two years time. The flat I have invested in is currently valued at £200k. I have exchanged contracts with the developer at which point they asked me to pay a 10% deposit (£20k).
One year on I decide to sell my exchanged contract as I no longer want to buy the flat. The flat is now worth £210k so I sell my contract for £21k (10%). This earns me a £1k profit on disposal of this contract.
Question:
Do I have to pay capital gains tax on the £1k assuming I have used up my tax free allowance.
Many thanks
K@k_khan
- Whether you can sell prior to completion will depend upon the contract. Some developers will bar buyers from selling before completion, or place onerous restrictions on any sale which make it unviable.- afaik, the 'profit' from flipping off-plan properties prior to completion is the gain in property value, so £10k in this example. I'm not an accountant but afaik the investors I've seen do this do have to account for CGT.
So you think CGT would be payable on the £10k and not the £1?0
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