capital gains question

theGrinch

if I purchase a property for £150k with £20k cashback and then sell it for £150k is CGT due? this is just a theory question and assuming it is not my PPR.

Cook_County

Who is giving you the £20K? Is it the developer, the mortgage lender or yiur mum's uncle!

Please expand the background here.

telly-addict

theGrinch wrote:

if I purchase a property for £150k with £20k cashback and then sell it for £150k is CGT due? this is just a theory question and assuming it is not my PPR.

I would say that you would have made a gain, as the true cost of the property to you was £130k and when you sell you would have a £20k profit. So the gain would be taxable. Interesting one - the Revenue may have something on their website about cashbacks.....

As usual, other costs of purchase are added to the base cost and selling costs are deducted from gross sale proceeds.

theGrinch

yep interesting question. just curious. I think its a gain, just not totally clear at what point it crystalises

telly-addict

theGrinch wrote:

yep interesting question. just curious. I think its a gain, just not totally clear at what point it crystalises

A gain on sale of property crystallises at exchange of contracts, not completion - that's the easy bit! It's the quantum that would be interesting.

theGrinch

could it be argued that the gain here crystallises on the cashback? this would make a huge difference if you hold the property for say 10 years

brantwood150

If you're talking about cashback on the mortgage to buy it I don't think you have a gain.

The property cost you £150,000 and you sold it for £150,000. The cashback on the mortgage shouldn't come into the calculation.

theGrinch

does this change if the cash back is from the vendor?

telly-addict

theGrinch wrote:

could it be argued that the gain here crystallises on the cashback? this would make a huge difference if you hold the property for say 10 years

No, on exchange of contracts for sale.

theGrinch

interesting.

lets consider it from other side. say the original vendor is liable to CGT. in this deal they received £150k and gave a cashback of £20k. would their CGT be calculated on the £130k or £150k ceteris paribus?

logical would seem to suggest £130k

theGrinch

brantwood, thats interesting you say if its a cashback on a mortgage its exempt. would you be liable if it was exactly the same amount but from the vendor? I guess leading on from my previous post the vendor would be liable for the difference assuming its not their PPR.