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Where Taxpayers and Advisers Meet

CGT 'simplification'

someone
Posts:691
Joined:Mon Feb 13, 2017 10:09 am
CGT 'simplification'

Postby someone » Sat Jul 14, 2018 8:38 pm

I've just discovered that The Government is planning a CGT simplification where residential property CGT will be paid within 30 days of completion.

The idea is insane. There was a consultation, and the governments response was 'we've noted your comments and we're going ahead anyway.'

So, in the way of hypothetical scenarios to a hypothetical law (at the moment)

A is selling a residential property and expects to make a 100k gain.

B is an unconnected third party.

A has another asset X with a base cost of 100k

Just before completion A sells X to B for 1 - giving a loss of 99999
A completes.
A does not have to make a CGT payment as there is no gain or rather there is an offsetting loss (A might make a nil return though)
A buys the asset back from B for 1 (just after completion)

Due to the B&B rules the sale and purchase with B is ignored. But at the time A made their sale there was a net zero gain. The consultation did say that future anticipated CGT events didn't affect the residential calculation - although the theory was that future events would be loss making rather than gain making and the government expected the tax now.

A does their SA and pays the CGT at the normal time in Jan.



There is no tax avoided so the anti-avoidance provisions are not in point.



What is the government on? While for many it will make little difference other than paying the tax earlier, there are many who have property portfolios where some may not have enough equity present to pay CGT and multiple sales might be done. Currently there's at least 9 months to raise the CGT due and multiple sales can be planned for. But now remortgaging will be necessary purely to ensure there are funds available regardless of the order of sales.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: CGT 'simplification'

Postby bd6759 » Sun Jul 15, 2018 12:07 am

But since the sale of X was not a bargain at arms length, the market value rule applies, and there is no loss... in fact probably a further gain.


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