Is tax due on a buyout fee for surrendering my regulated tenancy?

gelato_cat

I'm merging the two threads.

GDB2222

The £30k offer on a £600k regulated tenancy seems far far too low.

The estimate from the local estate agent also seems far far too low at £100k.

My understanding was that property subject to a regulated tenancy generally used to sell for around 50-70% of VP value. So, the difference in value would be £200-300k. Now, I admit that I was never involved with that type of property, and I have been out of investment matters for years. But I am surprised that things have changed so much. If they have. I would not rely on the friendly local estate agent, unless you are sure they are familiar with that type of tenancy. 

You say that the landlord has many properties with this type of lease. I think that they are just trying it on, trawling through their portfolio to see if anyone bites a stupidly low offer. 

MacSue

gelato_cat said:

I'm merging the two threads.

Thanks and sorry, I'm a bit of a rookie and don't do this much!

MacSue

GDB2222 said:

The £30k offer on a £600k regulated tenancy seems far far too low.

The estimate from the local estate agent also seems far far too low at £100k.

My understanding was that property subject to a regulated tenancy generally used to sell for around 50-70% of VP value. So, the difference in value would be £200-300k. Now, I admit that I was never involved with that type of property, and I have been out of investment matters for years. But I am surprised that things have changed so much. If they have. I would not rely on the friendly local estate agent, unless you are sure they are familiar with that type of tenancy. 

You say that the landlord has many properties with this type of lease. I think that they are just trying it on, trawling through their portfolio to see if anyone bites a stupidly low offer. 

I'll try to get 2 valuations for clarity not that the LL have said I can arrange that. Research says that such properties currently sell at 75-85% of the vacant value, not 50-70%. The estimate of the difference also took into account the amount of my fair rent so looking at the larger picture for an investor. It would also have been influenced by thoughts he might find an investor himself and therefore get business from it. I think he does have experience of this sort of tenancy and the locality. 

I agree they are trawling through to try to get some people to move, I have pushed them up and will try to push further.

MacSue

Update - I just spent a long time on the phone to HMRC and ended up with a Capital Gains Tax person. She says that it wouldn't be liable to CGT (it would if I was a business but not as an individual). She says it would be taxable as a compensation payment.  As I already get more pension than the personal allowance I would pay 20% and if I push it much higher as some have suggested here then it could get closer to the higher tax bracket!
Just thought it could help to add this in case anyone in similar circumstance finds themself here! Thanks for your thoughts.

Bookworm105

MacSue said:

Update - I just spent a long time on the phone to HMRC and ended up with a Capital Gains Tax person. She says that it wouldn't be liable to CGT (it would if I was a business but not as an individual). She says it would be taxable as a compensation payment.  As I already get more pension than the personal allowance I would pay 20% and if I push it much higher as some have suggested here then it could get closer to the higher tax bracket!
Just thought it could help to add this in case anyone in similar circumstance finds themself here! Thanks for your thoughts.

CG13030 - Compensation: personal compensation or damages - HMRC internal manual - GOV.UK (www.gov.uk)

GDB2222

MacSue said:

GDB2222 said:

The £30k offer on a £600k regulated tenancy seems far far too low.

The estimate from the local estate agent also seems far far too low at £100k.

My understanding was that property subject to a regulated tenancy generally used to sell for around 50-70% of VP value. So, the difference in value would be £200-300k. Now, I admit that I was never involved with that type of property, and I have been out of investment matters for years. But I am surprised that things have changed so much. If they have. I would not rely on the friendly local estate agent, unless you are sure they are familiar with that type of tenancy. 

You say that the landlord has many properties with this type of lease. I think that they are just trying it on, trawling through their portfolio to see if anyone bites a stupidly low offer. 

I'll try to get 2 valuations for clarity not that the LL have said I can arrange that. Research says that such properties currently sell at 75-85% of the vacant value, not 50-70%. The estimate of the difference also took into account the amount of my fair rent so looking at the larger picture for an investor. It would also have been influenced by thoughts he might find an investor himself and therefore get business from it. I think he does have experience of this sort of tenancy and the locality. 

I agree they are trawling through to try to get some people to move, I have pushed them up and will try to push further.

There’s an Allsop blog from a few years ago saying 75-85%, and I expect that they would know. I fully accept that I am out of touch these days.

MacSue

Bookworm105 said:

CG13030 - Compensation: personal compensation or damages - HMRC internal manual - GOV.UK (www.gov.uk)

So you are saying that this confirms what she said that CG tax does not apply? It's not quite the same situation - this is compensation for injury or damage and I would be voluntarily surrendering a tenancy. HMRC said no CGT but would be taxed in regular income tax

MacSue

[Deleted User] said:

My view (as someone who would not know one end of a regulated tenancy from another):

1. You have a regulated tenancy.
2. A regulated tenancy is a lease for tax purposes (see para 10 Sch 8 TCGA)

I find Para 10 Sc8 TCGA too hard to follow - seems to be about inheritance tax

gelato_cat

MacSue said:

gelato_cat said:

I'm merging the two threads.

Thanks and sorry, I'm a bit of a rookie and don't do this much!

You're welcome.  I guess just bear in mind next time that it's quicker and easier for you to make one thread and have all answers there - that way, there's less duplication in answers and you won't have to provide the same clarification info over again

If you make a thread and later decide it would be better on a different board, you can always ask for it to be moved.  Click "Report" under the post and select the "needs moving or merging" option.