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Indivdiual has somebuy to let properties. He also acquired some with a view of doing up to sell. He took out bridging finance on these in order to carry out the renovations etc. House finallky sold but for far less than anticipated. Bridging finance still o/s. What is the correct way to deal with the CGT and the mortgage/bridging finance?
Anon

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Euan's picture
By Euan MacLennan
21st May 2009 10:09

Eh?
You cannot deduct any interest from a capital gain.

As Pete says, you have to separate the properties between those let out and those bought for development and resale.

CGT only applies to the sale of the letting properties and the gain/loss is basically the difference between the selling and buying prices, less incidental costs of the purchase and sale. During the period of letting, all the properties are lumped together as a single business and income tax will be payable on the difference between the overall rental income and all the relevant costs, including mortgage loan interest.

The development properties will be subject to income tax individually on the difference between the selling price and all relevant costs, including the purchase price, development costs and loan interest.

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By User deleted
21st May 2009 09:01

Thanks Pete
Chap is self employed. He rents out a lot of properties and also bought a fell to sell. He is still stuck with the bridging finance re the ones he sold at less than expected. What costs can be deducted from the CG calculation - mortgage?,bridging finance etc

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By User deleted
20th May 2009 17:36

IT
Doing up to sell on is 'property development' and attracts IT and a requirement to be registered as SE as it is an activity in the nature of trade. The good news is that all the directly related costs and materials are deductible but the profit is taxed as your marginal rate. Regards Peter

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