Do I have to pay CGT if I sell my property with the price I purchased

IamWood

I have a rental property that I purchased 15 years ago in a great location, and I'd like my son to have it. Can I sell it to him at the original purchase price? If I do, will I still be liable for Capital Gains Tax (CGT)? Thanks

AskAsk

I think HMRC would not agree that the price is realistic as you have sold it to your son so you have messed around with the price to avoid capital gains tax.

Brie

Agree with the previous poster on the grounds that tax evasion is illegal. 

IamWood

How the market value is evaluated? I can gift the house to my son.

mybestattempt

IamWood said:

I have a rental property that I purchased 15 years ago in a great location, and I'd like my son to have it. Can I sell it to him at the original purchase price? If I do, will I still be liable for Capital Gains Tax (CGT)? Thanks

You can sell the property to him at below it's current market value. 

However, you will have a capital gain as, in accordance the the relevant legislation your son is a "connected person" so the disposal is deemed to be at the current market value:

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14530

mybestattempt

AskAsk said:

I think HMRC would not agree that the price is realistic as you have sold it to your son so you have messed around with the price to avoid capital gains tax.

Brie said:

Agree with the previous poster on the grounds that tax evasion is illegal. 

There is nothing illegal about selling a property below it's market value, nor is it illegal to transfer/gift a property.

However, the capital gain tax legislation, in certain circumstances deems that the disposal was a market value so the capital gain is calculated on that basis.

I think the OP was simply asking whether there would be a capital gain, not if he was avoiding tax and/or embarking on a criminal act.

mybestattempt

IamWood said:

How the market value is evaluated? I can gift the house to my son.

You could ask local estate agents and go with what you think is a realistic current market value or get a RICS current market valuation to support your calculation of the capital gain.

Keep_pedalling

IamWood said:

How the market value is evaluated? I can gift the house to my son.

You can certainly gif it to your son, but you will still have to pay CGT against market value.

Is your son a home owner already? If not and he would not be using the house as his home this would not be a good move for him as he will loose his FTB status and will pay 5% additional SDLT when he does buy a place of his own.

sometimes the  better option is to sell, pay your CGT aad gift cash.

AskAsk

mybestattempt said:

AskAsk said:

I think HMRC would not agree that the price is realistic as you have sold it to your son so you have messed around with the price to avoid capital gains tax.

Brie said:

Agree with the previous poster on the grounds that tax evasion is illegal. 

There is nothing illegal about selling a property below it's market value, nor is it illegal to transfer/gift a property.

However, the capital gain tax legislation, in certain circumstances deems that the disposal was a market value so the capital gain is calculated on that basis.

I think the OP was simply asking whether there would be a capital gain, not if he was avoiding tax and/or embarking on a criminal act.

I don't think so.  He is asking if he can avoid CGT by selling the house to his son at the same value as when he bought it so that there is no increase in value and so no CGT.

Yes, he can sell it at whatever price he wants but as it is sold to his son, where there is an obvious connection, HMRC will soon realise why the price is deflated and will demand the CGT based on its market value.

IamWood

AskAsk said:

mybestattempt said:

AskAsk said:

I think HMRC would not agree that the price is realistic as you have sold it to your son so you have messed around with the price to avoid capital gains tax.

Brie said:

Agree with the previous poster on the grounds that tax evasion is illegal. 

There is nothing illegal about selling a property below it's market value, nor is it illegal to transfer/gift a property.

However, the capital gain tax legislation, in certain circumstances deems that the disposal was a market value so the capital gain is calculated on that basis.

I think the OP was simply asking whether there would be a capital gain, not if he was avoiding tax and/or embarking on a criminal act.

I don't think so.  He is asking if he can avoid CGT by selling the house to his son at the same value as when he bought it so that there is no increase in value and so no CGT.

This simply isn’t true.

I have no intention of making a financial gain from my own children. At the same time, I’d like my son to take on some responsibility, so my wife suggested selling the property to him at the original price we paid 15 years ago.

There’s no point in arguing on a forum, but since you keep pushing the issue, I’m replying here.

silvercar

IamWood said:

AskAsk said:

mybestattempt said:

AskAsk said:

I think HMRC would not agree that the price is realistic as you have sold it to your son so you have messed around with the price to avoid capital gains tax.

Brie said:

Agree with the previous poster on the grounds that tax evasion is illegal. 

There is nothing illegal about selling a property below it's market value, nor is it illegal to transfer/gift a property.

However, the capital gain tax legislation, in certain circumstances deems that the disposal was a market value so the capital gain is calculated on that basis.

I think the OP was simply asking whether there would be a capital gain, not if he was avoiding tax and/or embarking on a criminal act.

I don't think so.  He is asking if he can avoid CGT by selling the house to his son at the same value as when he bought it so that there is no increase in value and so no CGT.

This simply isn’t true.

I have no intention of making a financial gain from my own children. At the same time, I’d like my son to take on some responsibility, so my wife suggested selling the property to him at the original price we paid 15 years ago.

There’s no point in arguing on a forum, but since you keep pushing the issue, I’m replying here.

You can sell to your son at whatever price you like. However, as you are connected parties, hmrc will deem that you have achieved market price for the property and you will be due to pay CGT on the gain. Another option would be to charge your son the price you paid plus the CGT you will need to pay. Bear in mind that your son loses his first time buyer status by becoming a property owner in this way.