Robert Bishop
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Capital Gains Tax

Capital Gains Tax
I purchased  a detached shop as a sole trader in mid 2000 for £89,000.00.
I am now looking to sell it for £170,000.00, hopefully.
I have not had any building work done other than internal decoration during my time of ownership.
My understanding is I will need to pay capital gains tax on some of the amount over £89,000.00, less my personal allowance.
I have two mortgages on two other shops still outstanding at the moment; one for  £91,000.00 and the other for £105,000.
Can I use the funds to clear some of these mortgages and will this remove the need to pay capital gains? 


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28th Jun 2012 13:41


Mortgage repayments are not allowable deductions for Capital Gains tax.  However, if you have recently purchased business premises or are looking to purchase new premises it is possible to roll over the gain into the new property under certain circumstances.  I would recommend that you seek specialist advice on this.

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By Samiyer
28th Jun 2012 13:59


Usually the best way to save on Capital gains tax is to invest the money within the stipulated time on buying out a business asset or completely new business space, this is done with a rationale of directing flow the funds into a particular sector, or balance the sector and reduce the spending capacity of an individual, thereby control on unwanted inflation.

however in your case, as mentioned even in the earlier reply, you cannot use the funds for Mortgage repayments without paying capital gains tax on the amount so recovered.

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By Samiyer
28th Jun 2012 14:01


It's the gain you make - not the amount of money you receive for the asset - that's taxed.


You bought some shares for £2,500 in June 1990.

You sell them for £12,500 in May 2011.

You've made a gain of £10,000 (£12,500 less £2,500).


from hmrc website

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28th Jun 2012 14:58

Roll over relief

Strictly you do not need to have used the proceeds of the sale to buy the replacement business asset. You are best talking to a professional for specific advice but broadly, as long as the property was used for business purposes for the whole of your ownership any purchase of a qualifying business asset during the year leading up to the sale or the three years following the sale can be used to swallow some of the gain.

How you buy that asset is immaterial so you could pay off the mortgages now and then take out new finance when you wish to buy a new asset.  

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