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Capital gains tax - connected persons

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Ed-1
Ed-1 Posts: 3,958 Forumite
Part of the Furniture 1,000 Posts Name Dropper
edited 23 September 2022 at 8:24AM in Mortgages & endowments
Some background to this in this thread:

https://forums.moneysavingexpert.com/discussion/comment/79484703

CGT:
If you dispose of an asset to or acquire an asset from a connected person, you need to replace the price paid with the market value of the asset when you work out your gain or loss.

Is there a way round the issue in the above thread whereby the aim is to empty the Lifetime ISAs on purchase of the property but at the same time release more of the equity in the property in capital borrowing?

If the purchase price is ramped up to allow a bigger mortgage to be applied for to go with the bigger deposit in the Lifetime ISA, would:
(a) the lender allow the bigger mortgage even when their valuation reduces the value of the property as long as the mortgage is still less than 90% of their valuation;
(b) capital gains tax only be due based on the lender's valuation (i.e. market value), rather than the purchase price?

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  • silvercar
    silvercar Posts: 49,562 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    Lenders work on the lower of the price you pay and the valuation. Where there is a connected party transaction, lenders may agree to consider the difference between the price you pay, if lower, and the valuation as a gifted deposit.

    CGT is based on the market value for connected parties.
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