Not A Buy To Let ??

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    Not A Buy To Let ??

    Hi to everyone,

    I am a new member to this site and would like to ask someone with taxation know how about my predicament.

    On the 19/02/1994 the wife and I and her parents signed a declaration of trust whereby her parents, the Nominees, had the council house they were living in transferred to them under the option to buy scheme. The wife and I, the Purchasers, provided £1600 deposit and a mortgage in the Nominees names provided the balance of £13000. In the D of T the Nominees only covenant was to pay £100 per month rent. Our covenants were to repay the mortgage, to keep the property insured at all times and to keep the property in good external repair at all times. I would like to add that the Nominees were paying £260 per month through the council and it may sound corny but we and they entered into this arrangement to save them money as they were both retired on state pensions.

    From the above date we have carried out all repairs externally and internally, including rewiring the property, building a porch, installing an alarm, new bathroom suite including new tiling, new internal doors throughout, double glazing throughout including the porch, retiling the kitchen, fit new hot water cylinder. Upon the death of the last parent in February 2013 we instructed a solicitor to deal with the D of T and although we began to renovate the property from the 12/03/13 the Land Registry transfer was completed on 10/09/13 and the value stated as £90,000.

    I have receipts for any costs incurred from the 19/02/94 to date of £39,656.17 including mortgage payments.

    My questions are, would this be classed as a buy to let as we did not enter in to it this way, would the property be liable to CGT, if so how much?

    Many thanks in advance

    #2
    Doesn't matter what it's called, a B2L, a holiday home in Spain,, a loads of shares in a company, etc etcc.. It is not your private residence so you pay CGT on any capital gain you make.

    Did the council when the place was bought know about this
    declaration of trust whereby her parents, the Nominees, had the council house they were living in transferred to them under the option to buy scheme. The wife and I, the Purchasers, provided £1600 deposit and a mortgage in the Nominees names provided the balance of £13000.
    and did it meet the rules of the massively discounted "right to buy" scheme??

    Can I just ask, please, since 1994 the names on the deeds have been whom??
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      If you owned the property, you've made a notional gain of £75,400.
      You won't be liable for any CGT until you sell the property.

      You could offset the cost of the improvements (not renovations/replacements) against the gain.
      You can't offset the mortgage payments.
      Both you and your wife have an £11,000 allowance in this tax year.

      If the property was owned by a trust, the allowances and rules are slightly different.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        Originally posted by jpkeates View Post
        You can't offset the mortgage payments.
        Not even the interest part of the mortgage? I was under the impression this is deductible, and only the capital repayment part is not?

        Comment


          #5
          You can't offset interest on the mortgage against the gain for CGT.
          You can offset the interest against income for income tax purposes.

          I'm sure the OP has been declaring the £100 a month rent they've been receiving
          and offsetting the interest and other costs to manage things properly.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            It may be possible to claim PPR exemption from CGT, if the house qualifies as Settled Property in accordance with section 225 TCGA 1992.

            I recommend that the whole transaction is analysed very closely to see if PPR relief applies.

            Comment


              #7
              Originally posted by jpkeates View Post
              You can't offset interest on the mortgage against the gain for CGT.
              You can offset the interest against income for income tax purposes.
              Of course you're absolutely right. I managed to somehow mix up CGT liability and income tax liability. Daft.

              Comment

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