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Capital gain

I have a client who jointly owns two properties with another, unconnected person - 50:50.  The properties are two blocks of residential lettings.  Both properties are mortgaged.

The proposal is for each person to end up with sole ownership of one of the properties and the related mortgage.  The properties are of unequal values, and with different amoounts of equity, but the parties have agreed on the exchange as there may be an element of development hope value with the one with the least equity.

HMRC has an example of a property exchange by two connected parties at CG73008, but not with mortgages, and I am unsure as to whether the arrangement re the mortgages will impact on the computations.   Illustrative figures are:

                                                     Property A            Property B

Current value                                  1,150,000                459,000

Mortgage                                        1,090,000                439,500

CGT base cost                               1,062,000                 600,000

Equity                                                  60,000                   19,500

Does anyone know the correct way to draft the CG comp please?  The consideration for the disposal of the a half share in one property is the value of the half share of the property taken over in exchange, but I am not sure how to reflect the mortgage element.  Thanks.


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17th Mar 2012 16:01

Mortgage not relevant

The debt attached to a property is not relevant for CGT computations, although it may be for IHT valuations. You appear to have a gain on one property and a loss on the other.

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17th Oct 2012 10:19

Stamp Duty Land Tax

I agree with taxwriter about CGT and would add that the mortgages will be relevant to SDLT - they are treated as consideration.  I don't know what happens for exchange of interests in properties but suggest you investigate.

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