Transfer property to minimise CGT?

by Readers Question

7:36 AM, 1st March 2021
About 2 months ago

Transfer property to minimise CGT?

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Transfer property to minimise CGT?

If Sunak changes CGT rules what is the best way to minimise CGT?

1. I purchased a rental property for £85k jointly a number of years ago in cash.
2. It is worth £125k now (£40K gain).
3. CGT allowance is £12,300, so joint is £24,600.
4. Can I sell the rental property for £85k + £24,600 = £109,600, which is below market value without issue to pay zero CGT and defer the rest to the company whenever it is sold? My Ltd company can pay me cash (as it has the reserves) and I understand there is currently no stamp duty.
5. Is there a tax implication I would fall foul of and more GGT or stamp duty would be charged?
6. Could my company sell it back on 7th March 2020 (me/wife)
on 10th April at £109,600?
7. Can I then sell it back to the company on 20th April for £125k (no stamp duty again, if Sunak extends).
6. Is there a better solution to take the CGT gain tax-free?

Yes, it is a snide and crafty thought. Is it legal?

Mark

Comments

Neil Patterson

10:42 AM, 1st March 2021
About a month ago

Errrr there's a lot of potential issues here and any real solutions would require an in-depth fact find and analysis of your entire portfolio and circumstances.
Best start with our tax planning page >> https://www.property118.com/tax/

Olls63

11:05 AM, 1st March 2021
About a month ago

It might fall foul of the General Anti Avoidance Provisions, or the Ramsay Principal .

XPP

11:52 AM, 1st March 2021
About a month ago

Hi Mark,
I am not an expert on tax. However, your approach will cost you more money than paying the CGT and you will be caught out in the eyes of HMRC.....
My dad always say that human beings are always worried..... If one do not have money then the worry is "No Money". If they create welth then the worry is "Too much Tax payment".
Please do not get offended.....I am just sharing my thoughts only......

JB

13:16 PM, 1st March 2021
About a month ago

There is still SDLT on a 2nd property

Paul Baker

13:38 PM, 1st March 2021
About a month ago

Just to add, as a Financial Adviser, if you dispose of an asset at below market value, HMRC will still use the true market rate to determine what CGT is payable. So any gift, sale, transfer or disposal will be considered for CGT purposes at full market value, although transfer in full or part between spouses is not treated as a disposal with the original acquisition cost rolling forward to the spouse.

Paul Shears

13:47 PM, 1st March 2021
About a month ago

Reply to the comment left by Paul Baker at 01/03/2021 - 13:38
That's interesting. Although I have never been in this position myself, my chartered accountant old me a few years back, that HMRC cannot define the market value of a property.

Paul Baker

14:09 PM, 1st March 2021
About a month ago

Reply to the comment left by Paul Shears at 01/03/2021 - 13:47
If that wasn't the case, then people would 'sell' their properties to their children at below market value without incurring an CGT and successfully passing the asset down the family line. Accordingly if you simply gift the property to your children it will still be treated as a disposal at full market value.

Olls63

14:50 PM, 1st March 2021
About a month ago

Reply to the comment left by Paul Shears at 01/03/2021 - 13:47
The Valuation Office Agency will determine value in cases of dispute.

Marie

22:47 PM, 1st March 2021
About a month ago

You can offset any refurbishment costs you incurred when you first purchased the property to reduce the CGT.

Falco van der Gragt

9:14 AM, 6th March 2021
About a month ago

Reply to the comment left by Paul Baker at 01/03/2021 - 13:38
Hi Paul. You say that you can move the asset between spouses without CGT being due.
I have a couple of questions on that:
Can this be done as part of the asset?
Can non married partners do the same?

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