CGT dilemma

PoGee

I purchased a rental 2 years ago, that I'm certain I overpaid for - it's in a bit of a rundown area. It was bought at £75k. I'm selling to a relative for £65k. The relative's mortgage valuation was £65k. On checking online, chatgpt says I need a valuation once contracts have been signed by both parties - is this when missives are concluded?
When I asked my solicitor, I was told to use the mortgage valuation but that was done 3 weeks ago so not sure if that valuation would be valid.
Also, when I check Zoopla, the valuation is £83k.
Should I get a valuation done by an estate agent? I would tell them that it's for CGT purposes. How much would they charge?
It didn't go on the open market so there's no home report.

Voyager2002

Why do you need a valuation? Capital Gains Tax is based on your actual sale and purchase price, and since you made a loss on this deal there is no tax liability.

[Deleted User]

PoGee said:

I purchased a rental 2 years ago, that I'm certain I overpaid for - it's in a bit of a rundown area. It was bought at £75k. I'm selling to a relative for £65k. The relative's mortgage valuation was £65k. On checking online, chatgpt says I need a valuation once contracts have been signed by both parties - is this when missives are concluded?
When I asked my solicitor, I was told to use the mortgage valuation but that was done 3 weeks ago so not sure if that valuation would be valid.
Also, when I check Zoopla, the valuation is £83k.
Should I get a valuation done by an estate agent? I would tell them that it's for CGT purposes. How much would they charge?
It didn't go on the open market so there's no home report.

Why would you favour the information provided by ‘chatgpt’’ over the actual valuation made by a surveyor and the advice of your solicitor?

Jeremy535897

You say "relative." Some relatives are defined as "connected persons," and for transactions with connected persons, you substitute market value for the sale price, and any loss is ring fenced. Just what is the precise relationship between you?

PoGee

Mother/child relationship. It's the Zoopla valuation that's thrown me so was wondering if HMRC would question the loss.

Hoenir

PoGee said:

Mother/child relationship. It's the Zoopla valuation that's thrown me so was wondering if HMRC would question the loss.

If the property is being sold at under market value then there's always the risk of the transaction being queried. 20%+ is significant. 

PoGee

Hoenir said:

PoGee said:

Mother/child relationship. It's the Zoopla valuation that's thrown me so was wondering if HMRC would question the loss.

If the property is being sold at under market value then there's always the risk of the transaction being queried. 20%+ is significant. 

I'm not sure how accurate Zoopla is. Should I get an estate agent valuation to be on the safe side and use that valuation for CGT calculation? 

silvercar

Ideally you would want a RICS surveyor to value it, being you are arguing on a loss, if you feel there is no way an independent valuation would show a profit I’d be less concerned.

glennevis

Although it's not required It could be cheaper to pay for a home report than a RICS surveyor's report.

PoGee

glennevis said:

Although it's not required It could be cheaper to pay for a home report than a RICS surveyor's report.

I don't fancy paying £450 for a home report. Is using an estate agent not a wise move? Mortgage valuation fees are around £120 so can't understand why just a plain valuation would be £450. 

Bookworm225

PoGee said:

Hoenir said:

PoGee said:

Mother/child relationship. It's the Zoopla valuation that's thrown me so was wondering if HMRC would question the loss.

If the property is being sold at under market value then there's always the risk of the transaction being queried. 20%+ is significant. 

I'm not sure how accurate Zoopla is. Should I get an estate agent valuation to be on the safe side and use that valuation for CGT calculation? 

as you state it is mother and child then that most certainly is a connected person transaction so the CGT liability is NOT based on price actually paid, instead it is based on a market valuation 

if we take as read your assertion the transaction is subject to CGT reporting then you will not know if the valuation you use in your tax calculation will be accepted by HMRC until they review your tax return, which they always will.

HMRC refers such cases to the Valuation Office Agency who may come up with their own valuation, different to yours. You would then have the right to contest that in a valuation tribunal, whose decision would be final.

there are 3 possibilities:
1. you submit your own figure and it is accepted. End of story.

2, you submit your own figure and it is not accepted. You then have a battle on your hands to demonstrate it is credible. ChatGPT isn't. Zoopla is laughable. Mortgage valuation has some merit but is related to how much of the loan would the lender get back, not what the property is "worth". VOA may disagree.

3. You get a professional valuation done by a credible source and use that. Typically that means a Chartered Surveyor who holds the Valuation qualification as a member of Royal Institute of Chartered Surveyors - not all RICS members are valuation accredited and "mere" Estate Agents may not be RICS members to start with.
Such a valuation will cost you, but that cost may include the person being willing to defend their number in a valuation tribunal where they will have high credibility and are more likely to win against the VOA.