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Selling property in stages over time to reduce CGT

If we own 2nd property, can we later sell 20% of the property each tax year to reduce CGT bill?

We are looking to invest in a 2nd property which will be let out and not be our primary residence. We would like to sell that property to a family member in about 10 years time. But we want to reduce our potential CGT bill. 2 questions:

1) does the CGT tax band depend on income tax band in the year of sale only? (Eg I am currently higher tax band but may be basic tax payer in 10 years time, if rules remain same, does it matter that I was a higher rate tax payer during ownership or is it only in the year of sale that matters?)

2) if we sell 20% of the property each year for 5 years will I get to use my tax free CGT allowance for each 20% sold or is there a tax rule that prevents this?

Thanks for your thoughts. 

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01st Dec 2018 11:36

1. It’s only the position in the year of sale that matters.

2. Yes but take care that each sale does not carry with it an implicit or explicit commitment to complete the later ones. The risk is that you would be treated as selling 100% on day 1 on deferred payment terms, which would tax the whole gain in the first year.

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to johngroganjga
02nd Dec 2018 10:55

But also 'linked transactions'?

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01st Dec 2018 11:40

You are seeking answers to a number of potentially complicated planning points, and you would be best served by visiting (and paying for) an accountant with good Capital Gains knowledge to provide that advice.

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By DJKL
01st Dec 2018 14:03

You are also presupposing property is a one way bet- past performance being no indicator of the future ought also to figure in your calculations as should, if borrowing involved, the likely direction of future interest rates and the timing of any such future movements.

In effect you are tax planning the gain before you have a gain.

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03rd Dec 2018 11:22

No-one can advise you what the law might be in 10 years time.

You may find the cost of valuations will exceed any CGT savings!

Each transaction would give rise to separate valuations.
You will have to consider the anti-avoidance law for IHTA see https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14821

If you sell a 20% share to a relative, this could constitute a transfer of value for IHT purposes. That is because an 80% share of the property is worth less than 80% of the whole-perhaps 10 - 15% less.

Even for CGT the value of a 20% share is similarly discounted, but see TCGA s.22

The difference between the value of 80% of the whole and the value of a stand alone 80% share would be a PET.
The question is whether the sale falls within IHTA s10(1)
which reads:-
(1)A disposition is not a transfer of value if it is shown that it was not intended, and was not made in a transaction intended, to confer any gratuitous benefit on any person and either—
(a)that it was made in a transaction at arm’s length between persons not connected with each other, or
(b)that it was such as might be expected to be made in a transaction at arm’s length between persons not connected with each other.

You refer to a family member

Is a "family member" a connected person. Broadly the answer is in TCGA s286[which also applies for IHT]
which provides:
(2)A person is connected with an individual if that person is the individual’s husband or wife, or is a relative, or the husband or wife of a relative, of the individual or of the individual’s husband or wife.
.....
and
(8)In this section “relative” means brother, sister, ancestor or lineal descendant.

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