TR1 incorrect valuation

0161Sam

I bought an apartment with two other friends for £94k. 

Several years down the line, sadly, we drifted apart so the partnership was not working as well, and one of my friends got terminal cancer. The property had lost value - the investment was not working as we had planned. So, we decided it would be best if one person took full ownership, especially as this was unnecessary stress for my friend with cancer. 

I ended up taking the property. My fried sadly passed while we were going through the legal process but his family signed all the relevant docs. The outstanding mortgage was £80k (a little over the going price), butI paid the mortgage off by re-mortgaging my house and using my saving. At the same time I gifted/transferred the apartment to my wife's name. So it went from me and my friend's name - to my wife's name.

Now a few years later we want to sell the apartment and have got a buyer for £91k. However, we've noticed the TR1 has £65k as the value. This is much lower than the original price I purchased it with my friends. It is even lower than the mortgage liability we took over when we transferred to my wife's name. Unfortunately we didn't check at the time so have just noticed it now.

We also don't have any paperwork to show it was a gift.

I am worried we have to pay capital gains tax on the value above £65k (e.g. £26k) although it is lower than the original price we bought it for and lower than the liability we took over at the point of transfer to my wife.

Can anyone help guide us on what we can do to ensure we don't pay more tax than we have to? Is there a way to fix the old valuation etc?

Flugelhorn

I don't know about these things but was £65K the amount that you paid the other two for their shares?

0161Sam

No, I didn't pay them anything. I paid off the outstanding mortgage which was more than the property value.

itsthelittlethings

How much was your share that you owned when you bought it off your friends? And how much did you pay off the mortgage? I would take this to be the purchase price but I know little. Ie add the two figures together.

0161Sam

Do I need to submit something to amend the TR1? How do I update the previous purchase price

itsthelittlethings

I don’t know the first thing about capital gains tax. It’s the tax you pay on the gain you have made.

user1977

It doesn't sound like there's a gain anyway. What matters are the actual prices (or valuations for transfers between connected parties), there's nothing magic about the number entered on the TR1.

0161Sam

user1977 said:

It doesn't sound like there's a gain anyway. What matters are the actual prices (or valuations for transfers between connected parties), there's nothing magic about the number entered on the TR1.

Is there a way to declare no profit so there are no problems in the future?

user1977

Not sure how it would avoid problems? It’s self-assessment, whatever you declare or don’t can always be challenged. But it sounds like you’re worrying unnecessarily.