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Hypothetical Question About Cpital Gains Tax On Property Sales

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I am asking this question on behalf of a friend who is a potential first time cash buyer. Lets call him, Osborne, not his real name.

Hypothetically, Osborne would like to buy a house for £100,000 which he and the vedor agree is a fair price.

Again hypothetically, Osborne knows the seller bought the house for £60,000 so would be liable to pay capital gains tax as its not his his prime residence ( am i right in thinking its 40%) so he is paying taxes of £16,000.

Osborne has seen his savings diluted due to low interest rates which he blames on the goverment and the bankers who have not been punished for their wrong doings.

Osborne wants recompense for his low interest rates on savings over the past few years which he thinks has been used to pay for the mistakes of others.

Osborne says to the seller i will pay £80,000 for the house with a bankers draft but on the day of the sale i will bring along £15,000 in £100 notes and place it on the table. This is not part of the deal but says to the seller i am not comfortable with the cash sitting on the table so would be happier if you kept it in safe keeping.

Is Osborne breaking any legalities. From my conversation with Osborne he is of the opinion he is definately not breaking any morality.

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I am asking this question on behalf of a friend who is a potential first time cash buyer. Lets call him, Osborne, not his real name.

Hypothetically, Osborne would like to buy a house for £100,000 which he and the vedor agree is a fair price.

Again hypothetically, Osborne knows the seller bought the house for £60,000 so would be liable to pay capital gains tax as its not his his prime residence ( am i right in thinking its 40%) so he is paying taxes of £16,000.

Osborne has seen his savings diluted due to low interest rates which he blames on the goverment and the bankers who have not been punished for their wrong doings.

Osborne wants recompense for his low interest rates on savings over the past few years which he thinks has been used to pay for the mistakes of others.

Osborne says to the seller i will pay £80,000 for the house with a bankers draft but on the day of the sale i will bring along £15,000 in £100 notes and place it on the table. This is not part of the deal but says to the seller i am not comfortable with the cash sitting on the table so would be happier if you kept it in safe keeping.

Is Osborne breaking any legalities. From my conversation with Osborne he is of the opinion he is definately not breaking any morality.

First, remember the seller gets a £10100 cgt allowance. The remaining £29900 is taxed at 28%. I am not an accountant, but I wonder whether if the owner is married he can transfer half of the house to his wife and use her allowance too?

I can guarantee that the HMRC would look dimly upon the arrangement you suggest (if they found out of course). Moreover, if they decide you have sold something or gifted it below its market value, they can make you pay CGT as if you had sold it at market value. See here. So, it is quite possible that the owner who sells for 80k + 15k under the table gets hit for a tax bill based on a sale at a value of 100k.

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One issue will be the contract. This will say £80,000. One party can then insist that the price is actually £80k and that it wont put up any cash. Osborne loses the £20k. Tough luck.

>From my conversation with Osborne he is of the opinion he is definately not breaking any morality.

If he considers the tax system immoral then that's between him and the authorities. They probably should have thought about this before buying the house.

I would have thought they would be better off finding legal ways to avoid the tax, spouse transfers, allowances/deductions/reliefs/indexation/rollovers for whatever the local law allows etc.

Can the house be nominated as a PPF for the spouse?

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With the use of computers and statistics, the Inland Revenue routinely screens transactions such as house sales for outliers. These are houses that gets sold for less than the accepted market rate. Outliers are then investigated.

I know one or two people that got caught doing this and were penalised.

You may also find that if its a reputable solicitor doing the deal they will refuse to be party to anything like this.

Its called tax evasion, so be very careful.

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Everybody hates paying Tax, and has since it was first introduced. However, you only pay Tax on profit. Therefore, in this day and age it is a nice problem to have.

I can honestly say we have never done anything like this. Its not morality, its an issue of trust. As Very mean pointed out someone, the seller is going to have to sign a contract at say £20k lower than he is getting the house for. There is no way he can tell his Solicitor about this so it will be a legally binding agreement. He is taking both the risk of you not standing by your gentleman's agreement and secondly, If someone told the taxman he pays, not you.

The chances of the Taxman queering a low price in today's market is slim, but you (the seller) have crossed the line. Again, not morally but someone now has a hold over you. You have put yourself in a position where someone can inform the authorities and place you in quite a bit of trouble.

As described above, if the man is married, and they have sold no other house this year they can transfer into joint name (almost free of charge) and will have almost £20k in free allowance. He can add to the £60k any fees etc in purchase and sale, say £2,000 and the cost of any improvements if he didn't use it to offset against rent income on his annual returns. Hopefully he only has £17k of taxable gain here and at 28% is £4,790.

My advice is to pay it and enjoy the fact that he is probably the only person to make £45k on property in NI this year. If he had a company he would certainly make the BT's top 100.

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Thanks for the replies. I shall pass them on to my friend.

By the sounds of it the vendor would not be paying as much capital gains tax as thought.

My friend does not have any problems with paying taxes. Normally he would never think of evading taxes but it seems it seems there is a system at the top which allowsw tax avoidance but at the bottom punishes tax evasion whenever morally they are the same thing.

My friend would have no morals on tax any more as long as bankers and some developers are walking the streets instead of being in jail where they should be.

He thinks he has already paid enough tax on having savings eroded by low interest rates, money which has partly gone to paying bankers bonuses when those same bankers should be in jail.

He thinks if he gambled with other folks money and lost he would be in jail and rightly so. I have to agree with him.

When a Bearings banker gambled with money that was not his he went to jail.

Governments say we had to save the banks to save ourselves. What they really meant was that they had to save the banks to retain the status quo of an elitist wealthy society. Had the banks been allowed to go under a lot of the poorer in society would not be any worse off. In fact they would be better off relatively if it meant everyone starting from ground zero.

What was to stop governments taking 20% of the wealth off the richest instead of saving the banks with the consequence of lost jobs paying for it all. If governments said they were not going to save any banks the richest would be happy to pay 20% of their wealth if it meant preventing meltdown. Its not the poorest who would suffer most if there was a collapse of economic order but the richest. Because a gun and a can of baked beans would be worth more than the value of their mansions.

The injustice of this all is sickening.

Rant over.

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Just a quiery on CGT, has anyone had any experience of CGT implications relating to the transfer of family owned land (no planning permission as yet but an application will prob be look at in the near future, transfer from father to daughter) that has been handed down through a number of generations?

Professional advice I'm sure will be sought in due course, just wonderin if anyone has had or heard of any situations like this

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I am asking this question on behalf of a friend who is a potential first time cash buyer. Lets call him, Osborne, not his real name.

Hypothetically, Osborne would like to buy a house for £100,000 which he and the vedor agree is a fair price.

Again hypothetically, Osborne knows the seller bought the house for £60,000 so would be liable to pay capital gains tax as its not his his prime residence ( am i right in thinking its 40%) so he is paying taxes of £16,000.

Osborne has seen his savings diluted due to low interest rates which he blames on the goverment and the bankers who have not been punished for their wrong doings.

Osborne wants recompense for his low interest rates on savings over the past few years which he thinks has been used to pay for the mistakes of others.

Osborne says to the seller i will pay £80,000 for the house with a bankers draft but on the day of the sale i will bring along £15,000 in £100 notes and place it on the table. This is not part of the deal but says to the seller i am not comfortable with the cash sitting on the table so would be happier if you kept it in safe keeping.

Is Osborne breaking any legalities. From my conversation with Osborne he is of the opinion he is definately not breaking any morality.

Formerly a favourite dodge of money launderers. Any solicitor going along with this in modern times is looking at a rapid end to his career.

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Thanks for the replies. I shall pass them on to my friend.

By the sounds of it the vendor would not be paying as much capital gains tax as thought.

My friend does not have any problems with paying taxes. Normally he would never think of evading taxes but it seems it seems there is a system at the top which allowsw tax avoidance but at the bottom punishes tax evasion whenever morally they are the same thing.

Tax avoidance and tax evasion are very different. Avoidance is entirely legal and requires no deceit - for example, you can put your money into timber production, where profit is tax free. Evasion is where I fail to declare my cash income, which involves lying.

I'm trying to work out how I can live on Sark for half the year and work the rest.

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Just a quiery on CGT, has anyone had any experience of CGT implications relating to the transfer of family owned land (no planning permission as yet but an application will prob be look at in the near future, transfer from father to daughter) that has been handed down through a number of generations?

Professional advice I'm sure will be sought in due course, just wonderin if anyone has had or heard of any situations like this

how many acres? Is it zoned?

If not hold off the planning application until the transfer is complete.

You are allowed a CGT free amount of almost £300k. Thats not to each family member but of the whole estate.

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It's only about 1 acre part of an old unused farm being transferred with the aim of applying for pp down the line. Her father is still alive ( early inheritance) not breaking up the entire estate.

Cheers belfastVI any info greatly appreciated!!

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It's only about 1 acre part of an old unused farm being transferred with the aim of applying for pp down the line. Her father is still alive ( early inheritance) not breaking up the entire estate.

Cheers belfastVI any info greatly appreciated!!

you can give free gifts during your life time up to £5k per year. (might have to live 7 years after you give it, but the taxable amount deprecates exp every year)

Sounds like it should be ok.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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