Structured sale to reduce CGT liability

Dave.44 · 2 June 2018 at 1:13PM

Is this legal in the UK? Reduce CGT to low level or nothing by structured sale of anything liable to CGT such as a second home. By structured sale, I mean sell an asset (a second home) and receive only what was paid for it this tax year and the rest over the next few years say 5 to 10 years. Could be done by trust with the seller which is rather dodgy. But the extra money could be put in an investment fund, annuity or trust fund up front with a reliable insurance company or bank and paid out at say £22,000 a year (to a married couple) for some years. No tax provided that there is no other CGT liability. I am about to retire and this could boost my income, tax free, for 6 years in addition to my pension. Looking at £150,000 price gain.
The idea is that the extra money above purchase price would be held in a fund outside my direct control so the CGT would be liable year by year as it comes up. (Purchase price is not liable for CGT)
There are firms in the USA specialising in this but I cannot find any in the UK. Perhaps the CGT would still be chargeable up front at the time of the sale so no interest in doing it. Does anyone know please?
Imho CGT is a price difference tax, not a capital gains tax which would need to be index linked to justify the name and is set at a very high level to discourage speculation in land by professional house builders. Unfortunately small fry trying to set up a pension for their old age get caught in the trap. Whatever happened to George Brown?

Keep_pedalling · 2 June 2018 at 1:35PM

CGT is payable on disposal. Even if you gave it away to a family member you would still have CGT to pay based on market value.

Dave.44 · 2 June 2018 at 2:06PM

Thank you Kep Pedalli. But the point is that I would not receive full payment at first and I would have no direct control of the outstanding amount. The sale price would be determined at the time of sale but if I have not received the money how can I be liable for tax?
Eg. I buy for £250K and sell for £400K but only receive £250K of it at the time, then that year I have made no "profit". Profit being defined as price difference between buying and selling.
If I made a bad sale and never received any more of the money, would I still be liable for the CGT? Maybe I would based on the market value of the property.
Anyway, the sale would be structured so that some payments would be spread over subsequent years as part of the contract. So why wouldn't the tax also be spread?
Truth is that I'm not really sure but it looks like it could be possible.

Pennywise · 2 June 2018 at 2:28PM

Dave.44 wrote: »

Thank you Kep Pedalli. But the point is that I would not receive full payment at first and I would have no direct control of the outstanding amount. The sale price would be determined at the time of sale but if I have not received the money how can I be liable for tax?
Eg. I buy for £250K and sell for £400K but only receive £250K of it at the time, then that year I have made no "profit". Profit being defined as price difference between buying and selling.

Google "chose in action" which is what you're looking for. It covers scenarios when the actual proceeds are deferred/uncertain for any reason. You're basically taxed on it's value, which can then be amended in later years if the actual amount received is more or less than what you were originally taxed on.

Chose in action covers where amount received may be variable. If the amount received is actually certain, but just that there may be a delay, you're taxed on the contract value in the tax year the sale occurs - however long you have to wait to receive the money is irrelevant.

00ec25 · 2 June 2018 at 3:55PM

Dave.44 wrote: »

The sale price would be determined at the time of sale but if I have not received the money how can I be liable for tax?

very obvious ploy which was addressed long ago

the phrase to use is "deferred consideration"

you have an ascertainable consideration - you have agreed a fixed selling price with the purchaser...
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg72805

if ascertainable, CGT is applied to the full price, not the fact payment is made in instalments over time
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14881

why America allows it is down to them

Dave.44 · 2 June 2018 at 4:16PM

OK you've convinved me. CGT is due on the sale.

Thanks for explanation.

Structured sale to reduce CGT liability

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