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.