Capital Gains Tax on second property

helpneeded12321

If you purchased a second property for £290,000 and retened it out for 3 years and then sold it to a relative for £200,000. Current market value is £300,000. Would you have to pay capital gains tax?

theartfullodger

Nobody (NOBODY!!) will know.  Unless you can tell us what the  CGT tax rates and regulations WILL BE when you actually sell.

Could you kindly tell us please what the rates and regulations will be and exact date of sale??  And if you will have any other capital gains to consider (eg sale of shares...)

lisyloo

Today CGT will be due on £7K as currently allowance is £3K.

p00hsticks

I think it will depend on the closeness of the relative.
If they are close enough for HMRC to consider them a 'connected person' then for CGT purposes you'd need to use the current market value and not the price you actually sold it at. 
CG14580 - Connected persons - HMRC internal manual - GOV.UK

So yes, potentially CGT to pay, although probably not a lot by the time you've deducted buying and selling costs and assuming you have not used your CGT allowance for the year elsewhere. 

Any CGT due needs to be paid within 60 days of completion.

helpneeded12321

p00hsticks said:

I think it will depend on the closeness of the relative.
If they are close enough for HMRC to consider them a 'connected person' then for CGT purposes you'd need to use the current market value and not the price you actually sold it at. 

Thank you. It would be a brother so would be on market value but do you know how that is determined by hmrc?

p00hsticks

helpneeded12321 said:

p00hsticks said:

I think it will depend on the closeness of the relative.
If they are close enough for HMRC to consider them a 'connected person' then for CGT purposes you'd need to use the current market value and not the price you actually sold it at. 

Thank you. It would be a brother so would be on market value but do you know how that is determined by hmrc?

I think it's up to the seller to determine it but with HMRC having the option of challenging the valuation if they think it is too low. 
The safest thing to do would be to pay for a RICS surveyor to do a 'red book' valuation as HMRC would be unlikely to dispute that. 

Perhaps given that he is receiving a generous discount, the brother would be prepared to pay for it ? 

Bookworm105

helpneeded12321 said:

p00hsticks said:

I think it will depend on the closeness of the relative.
If they are close enough for HMRC to consider them a 'connected person' then for CGT purposes you'd need to use the current market value and not the price you actually sold it at. 

Thank you. It would be a brother so would be on market value but do you know how that is determined by hmrc?

it is self assessment, but HMRC will compare your market valuation with their own information and may challenge your figure if it is way off

HMRC has a department called the Valuation Office Agency who keep copious records of every property sale in the UK. VOA can compare your value against what they know other properties sold for at that approximate time. If you are off, the VOA may then undertake a physical inspection to see if the condition of the property justifies a lower value. If it doesn't, then tough, VOA value will overwrite yours

as p00hsticks says, if you offer a valuation arrived at by a person with professional standing then the VOA are less likely to spend their own time in trying to compare to their info, so may just accept it as presented

helpneeded12321

p00hsticks said:

helpneeded12321 said:

p00hsticks said:

I think it will depend on the closeness of the relative.
If they are close enough for HMRC to consider them a 'connected person' then for CGT purposes you'd need to use the current market value and not the price you actually sold it at. 

Thank you. It would be a brother so would be on market value but do you know how that is determined by hmrc?

I think it's up to the seller to determine it but with HMRC having the option of challenging the valuation if they think it is too low. 
The safest thing to do would be to pay for a RICS surveyor to do a 'red book' valuation as HMRC would be unlikely to dispute that. 

Perhaps given that he is receiving a generous discount, the brother would be prepared to pay for it ? 

Thank you. I'm trying to help a confused friend who's been given conflicting advice. I will get them to look into a redbook valuation as that seems like a good idea

Bookworm105

helpneeded12321 said:

p00hsticks said:

helpneeded12321 said:

p00hsticks said:

I think it will depend on the closeness of the relative.
If they are close enough for HMRC to consider them a 'connected person' then for CGT purposes you'd need to use the current market value and not the price you actually sold it at. 

Thank you. It would be a brother so would be on market value but do you know how that is determined by hmrc?

I think it's up to the seller to determine it but with HMRC having the option of challenging the valuation if they think it is too low. 
The safest thing to do would be to pay for a RICS surveyor to do a 'red book' valuation as HMRC would be unlikely to dispute that. 

Perhaps given that he is receiving a generous discount, the brother would be prepared to pay for it ? 

I will get them to look into a redbook valuation as that seems like a good idea

note Red Book valuations can only be undertaken by a RICS surveyor (that is, MRICS, FRICS or AssocRICS) who is a member of the RICS Valuation Registration Scheme and is known as a Registered Valuer (RV).

you can search for RVs on the member index by ticking the registered valuer box under the accreditation menu, Not all RICS surveyors hold RV qualifications 
https://www.rics.org/networking/find-a-member

Keep_pedalling

Apart from you annual CGT allowance you can also deduct buying and selling costs