Gifted Discount / Cash Back

[scampbell@hotmail.co]

What are the tax implications of a 15% gifted discount/cash back for a BTL property?

1) Is any income tax due on the gift?
2) For the purpose of CGT is it calculate on the full price or the price - discount?

Thanks in advance
Stuart

[Lambs]

You must be careful when using the term "gift," as it has a specific meaning(s) where tax is concerned. I say this because if this is a normal commercial transaction, and the so-called gift is a term of the agreement, then it's unlikey to be a "gift" for tax purposes.

A normal commercial discount is not chargeable to Income or Capital Gains Tax. It would, however, reduce your allowable costs when you came to sell the property at some point in the future, and (hopefully) made a Capital Gain - i.e. your deductible costs would be based on the lower, discounted amount.

Without seeing the agreement itself, it's difficult to be sure. I should recommend that you speak to your tax adviser before making the transaction, just to put your mind at rest.

[scampbell@hotmail.co]

Thanks,

I have checked the terms and the actual phrase used in the paper work is: a settlement discount, the word gift is never mentioned. The builder will provide 15% cash back on completion as a settlement discount.