Property Capital Gains Tax question

Exmocol

Hello and thank you in advance for anyone who is able to help me in the following matter.

My partner and I have just sold a second property we owned and are now due to pay capital gains tax.  The house was originally bought for £172,000  We sold it for £310,000.

When we originally bought the property we received £15,000 from my brother on condition that when we sold the house we would pay him back with interest.  Our solicitors have now paid him the agreed sum of £23,000 deducted from the sale price before we received the remaining £281,000.  Legal and estate agent cost were £6,000.

My question is, is our 'gain' (sold price) £310,000 minus (bought price) £172,000 =  a gain of £138,000?

Or do we take into account the money from my brother, (sold price) £287,000 minus (bought price)  £157,000 =  a gain of £130,000?

Please let me know if you require any clarification on the above.

[Deleted User]

Neither. The gain is 310000 less 172000 less £6000 selling costs less ? buying costs. The loan is irrelevant for CGT. 

p00hsticks

As an aside, you are aware that you only have 60 days from completion to pay it.....?

Exmocol

Hello, sorry for taking so long to get back and thank you both for replying to my question.

I appreciate that we can reduce the 'gain' by claiming against costs such as buying and selling fees.  If we claim for improvements such as the cost of an extension or roof work, what happens if HRMC dispute this and say we are claiming for general maintenance (in the case of the roof work)?

Also thanks for the 60 day reminder!

NorthYorkie

The cost of an extension would be an allowable deduction in computing the gain, provided it is reflected in the value of the property at disposal. The term "roof work" is too vague to give any firm opinion - it is likely to be just repairs/ remedial work and as such not deductible. If claimed and challenged successfully you would have additional tax to pay plus interest and maybe even a penalty.

Exmocol

Thank you very much for the info NorthYorkie.