Capital Gains Tax

Capital Gains Tax

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Hi All,

Will I have to pay CGT on sale of a property in the UK that I acquired from my father in law as a gift 3 years ago? My father in law is NOT a British citizen!

The property is being sold for £120k and on the completion statement when my father in law gifted it to me it says £54k for the gift. Also note that I took a mortgage out on the property for £55k to pay my father in law for the property.

I am very confused about the following:

  1. Am I liable to any CGT?
  2. if yes, what is my cost of purchase? Will it be £54k gift + £55k mortgage or only £54k gift amount??

Thanks!

Replies (9)

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By TaxationPete
23rd Feb 2012 12:27

Confused. If he 'gifted' you the property why did you have to pay him. Did he just gift you part of the property or what. Regards Peter

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By TaxationPete
23rd Feb 2012 12:29

The mortgage has nothing to do with a CGT calculation. Regards Peter

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By Siddiqa
23rd Feb 2012 12:56

Hi Peter,

THank you for your reply.

Does that mean I pay CGT on £120-£54k = £66k - £10.6 allowance = £55.4K ???

Someone said since it is a gift from a non resident UK the base cost is the gift value.true?

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By TaxationPete
23rd Feb 2012 14:24

Can you please answer the questions

"Confused. If he 'gifted' you the property why did you have to pay him. Did he just gift you part of the property or what."

A gift from a non resident make no difference. What was the open market value of the gift on the day it was gisfed. Regards Peter

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Replying to AlexH:
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By Siddiqa
23rd Feb 2012 14:40

This is the long story

Ok this is what happened...

Father in law was involved in a court case regarding the above property. He won the case and was asked to pay £27k to the owners to free the mortgage and £27k to the lawyers for the court fees after which the owners would transfer the property on his name.

Father in law could not afford that money so I said I will raise a mortgage and pay these off so father in law gifted the property to me!

hope this makes sense.

I was also told (as you mentioned) that irrespective of him being a non-resident , the market value should be taken however, I am getting mixed responses from other people.

Called HMRC and they said I will not have to pay CGT as Ive made a loss (market value at time of gift more than what it was sold for today) but I will have to pay a tax liability that arose at the time of the gift?!?! CONFUSEDDDDDDDD!

 

 

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By TaxationPete
23rd Feb 2012 14:56

What you FinL paid as a result of the court case in not relevant. He must have been the legal owner prior to gifting the property to you so the gift will be deemed as the OMV. If you sold it for less then there will be no CGT liability.

What HMRC are referring to I do not know. I would put it in writting to them, the call centres are not a reliable source of guidance. Regards Peter

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Replying to Ruddles:
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By Siddiqa
23rd Feb 2012 15:02

So market value at time of gift was £150k and I have sold it now for £120K - so no CGT to pay? is that what you mean?

And him being non-UK resident doesnt affect anything?!?!?!

Sorry for so many questions but ur being a great help! Are you a tax consultant - if you dont mind me asking.

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By TaxationPete
23rd Feb 2012 15:16

Yes correct. Regards Peter

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By Eddystone
23rd Feb 2012 16:52

Simple, surely - you pay CGT on the sale price minus the market value at start, regardless of what it actually costs as it was a transaction between connected persons. The Revenue may query the market value and ask the District Valuer to give his / her opinion, if you disagree then you can get your own valuer in and leave them to sort it out between themselves.

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