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We bought a fairly derelict property and have gutted it and renovated it to a high standard with the intention of keeping it forever. However we have received a stunning offer for it and we obviously will have a large CGT bill. There 6 of us so there is some mitigation with our own allowances but we have not let it so far so can we claim the mortgage interest cost against CGT when it implies it can only be offset against revenue?
I am going to watch this thread to see what others say.
because you have not let it, HMRC could claim you were acting as a trade I think, in which case you might be liable for income tax, not CGT, in which case, yes, you could claim the interest, adn all other costs.
What's not clear to me is, if this is a one off, would CGT be allowed... especially if the intention was originally to let it
We have put a great deal of effort into this property with only the intention of letting it. It is only a massive offer out of the blue that has created this situation, it was suggested that if we carried out our plan to let it even for a month or two the situation would change. The putative purchaser would be willing to wait, but would it work?
Nick, Is this outside the company you mention in your employee tax post?
If this property is inside the company, I don't think CGT comes into it, as companies only pay corporation tax
Yes for the present. We have purchased using residential mortgages initially as it was easier and the individuals had high incomes. The idea was to transfer them into our SPV Ltd. We know the stamp duty is a cost but as there are several owners the individual CGT exemptions ameliorates the net cost. Employing one of our number as a genuine working employee to work on new acquisitions and maintain others suits us fine but I assume that the cost of such employment needs apportioning between capital and revenue expenditure.
Interest cannot be claimed as a cost for CGT
Director of Tax Peplows Limited
CTA ACA FCCA
Nick, if it is let for just a month or two, and you report letting income, I don't see why that should not be OK, it would, after all, be in line with the original intent to let it out.
Whether you can rent it out for just a month or two is a different topic...
The piece I am really not sure about is, if you will be OK claiming CGT payment instead of income tax payment, if no letting actually takes place.