selling holiday home -CGT implications for delayed completion

Dead_keen

https://forums.moneysavingexpert.com/discussion/comment/81993102#Comment_81993102

That's right - and for completeness I agree with @poseidon1

But I would say that I don't understand the commercial reason for such a long delay between exchange and completion. That makes my spidey senses tingle as it might change things.

For example, if completion only happens when planning permission is obtained then the tax point for CGT will be delayed until planning permission is obtained (and you would use the exchange rate on that date to work out your sales proceeds).

Another example is if you are selling to your kids and giving them a longer than normal chance to get the cash together. In that case, the sales proceeds are deemed to be the market value on the date of exchange (which may or may not be what you are selling for).

This is also a bit of a Schrödinger's cat situation. Until completion happens, you have no disposal and no tax liability. But when it does complete, you have to pretend the disposal was the date of exchange (with the tax payment dates and interest on late tax based on those dates).

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81993421#Comment_81993421

There’s no commercial logic. We are selling a flat we bought as a holiday home to a stranger, we didn’t have the flat for sale but were approached through our agent. We have a couple of short term lets already agreed on it for this Summer, so wouldn’t want to mess people around on that. Our original conversation we were talking of completion late in the year, but then the buyer wanted a further delay, so we agreed. It means we have the place next Summer if we want to go there. We are relaxed about the date, it’s a practical consideration rather than commercial, it means we have more time to visit and remove personal items etc.

I agree with you on the Schrödinger’s cat. It’s particularly annoying that CGT on exchange is due over there, rather than on completion. So if completion fails to happen, we don’t get the tax back. The retained deposit is high enough to cover that, but it would be annoying. And I don’t quite trust the buyer, he’s pulled a couple of stunts already!

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81993517#Comment_81993517

At least in this scenario, HMRC provides relief for irrecoverable instalments by allowing you to revisit your original computation and recalculate to obtain a partial tax refund - see below

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14933

Dead_keen

https://forums.moneysavingexpert.com/discussion/comment/81993530#Comment_81993530

Here I disagree with @poseidon1 If completion does not happen there is no disposal. So no need to put anything on the tax return in the first place (unless some of the deposit or instalments are retained, which has its own tax consequences).

So going back to the cat with the flask of poison:

1. Return due before completion: Don't pretend there has been a disposal. Put a note in the CGT white space box along the lines of: I've exchanged, no disposal yet, if completion occurs I'll provide details / amend my return, mention likely DTA and (potentially if you choose do so so) say you have made a protective payment of £x,
2. Completion later: Amend tax return for year of exchange to include gain (or write to HMRC if too late to amend return). Pay tax by 31 January in the tax year after exchange (or as soon as possible after to reduce interest on late tax - unless you have paid tax earlier, voluntarily, to protect yourself from interest).
3. Contract doesn't complete: Do nothing (unless you have retained some or all of the deposit or you have voluntarily paid tax early, in which case ask for it back).

Should the OP pay the CGT voluntarily early? Entirely up to them depending on what cash they have available and interest rates.

Jeremy535897

https://forums.moneysavingexpert.com/discussion/comment/81992909#Comment_81992909

Yes. I don't think the foreign currency bank account exemption will apply, as that is for gains on currency held in a bank over time, and this is not, or probably only for a few days..

Jeremy535897

I think there is a gain or loss, depending on exchange movements, whenever an instalment is received, being the difference between the sterling value of the foreign currency at exchange, and the sterling value at the date of receipt into the overseas account. I agree any subsequent movements in value are likely to be exempt under the rules on foreign currency bank accounts for personal use.