Selling a rental property that was previously shared ownership and CGT liability

rosieusa_2

Hi, 

I'm trying to work out the figures I need to use for working out CGT.   My friend and I purchased 5 rental properties a number of years ago.  Following a change in our circumstances, we split the properties and I took out new mortgages on 3 of them.  They are listed on the land registry with the original selling price in 2016, and in 2020 the consideration is listed as "certain good and onerous causes" when they were transferred. I am now selling 1 of the properties and I know that I will need to pay CGT, but can't work out the value to be used as the purchase price, can anyone help please?   

The original purchase was £85k + legal costs and when they were transferred the value of the property I am selling was assessed as £105k + legal costs.  

Thanks in advance

Grumpy_chap

rosieusa_2 said:

Hi, 

I'm trying to work out the figures I need to use for working out CGT.   My friend and I purchased 5 rental properties a number of years ago.  Following a change in our circumstances, we split the properties and I took out new mortgages on 3 of them.  They are listed on the land registry with the original selling price in 2016, and in 2020 the consideration is listed as "certain good and onerous causes" when they were transferred. I am now selling 1 of the properties and I know that I will need to pay CGT, but can't work out the value to be used as the purchase price, can anyone help please?   

The original purchase was £85k + legal costs and when they were transferred the value of the property I am selling was assessed as £105k + legal costs.  

Thanks in advance

If you have 5 (or 3) rental properties, it would be common to have engaged the services of an Accountant along the way.  If so, the Accountant will be best placed to advise with all the relevant details (which have not been stated in the post).

rosieusa_2

Thanks and I've e-mailed the accountant, but he's on leave for the next 3 weeks (I know it doesn't need to be paid for 60 days) but, I was hoping to get an understanding of what the likely costs might be.  No harm in that! 

silvercar

Presumably when you changed the ownership, you sorted out any CGT due at the time.

but now: you’ve owned x% valued at Y and then the remaining 100-x% valued at Z in 2020, so now the sale price less x% of Y less (100-x)% of Z is your gain. Less also your buying and selling costs. 

I’ve assumed, splitting the properties means you now own all of the one you are selling.

Example: you bought 50% of the property full value 85k in 2016, then levered up to 100% of property full value £105k in 2020. Let’s say it’s now worth £150k. You have 50% of a gain of £65k=£32.5k plus 50% of a gain of £45k=£22.5k. Total gain is £55k. Less 50% of the buying costs in 2016, less all the costs of acquiring the other 50% in 2020, less all the selling costs now. 

Proviso: I’m thinking if you didn’t actually pay £52.5k for half the property in 2020, it would be what ever you paid as the total market price for the second half purchased in 2020. If you did it by property exchanging, you would (should?) have accounted for the gain on the properties you sold half shares of and had valuations to match. Ie if you swapped shares you would have had gains at the time and accounted for them with CGT payments to hmrc at the time.