Singing Pig

I verbally agreed on a price with an organisation to buy my small portfolio. They have since surveyed and officially offered through my lawyer a sum around 30% higher. They had asked me earlier if it was ok for me to sign some sort of mandate (which I haven't seen as yet) I am now assuming this mandate will be to reimburse them with the difference when the deal is done and that they are using the higher figure for borrowings. Would I be responsible for CGT using the higher figure or would I include the difference in tax return as costs incurred? I will need to accept or reject offer in a day or two.

Ben,

Dont you need to make sure exactly what the deal is before making firm decisions and agreements.

ben lomond:

They had asked me earlier if it was ok for me to sign some sort of mandate (which I haven't seen as yet) I am now assuming this mandate will be to reimburse them with the difference when the deal is done and that they are using the higher figure for borrowings.

You can't be sure until you have seen the mandate and clarified your position with them. A tax specialist accountant should be able to answer this question once you have the full facts.

It will probably be the net value - ie the actual price you are getting. The gross up "cash back" or "gift" will not really be a gift as it will presumably be 100% conditional on completion. This sort of deal is normally about pulling the wool over the eyes of the surveyor and mortgage company.

Do of course speak to your accountant BEFORE any deal is struck as any tax planning oppportuntites will be lost once you have exchanged contracts.

Regards,
 

 

 

 

Hi Ben,

James is absolutely right on this, you need to take professional advice.

CGT is generally due on the Selling (contract Price) - PP - Costs of Capital/Acquisition/Sale

To do anything different will likely trigger an investigation which you will need to be prepared for.

CGT on BTL portfolios is a significant issue.

Will you be realising a profit from the portfolio?

If not, you could consider exchanging with a delayed completion (years), with a contract clause that the buyer makes and manages the mortgage payments as well as the properties.

You can sign TR1 etc so that you never have to deal with the properties again. We are currently acquiring portfolios in this manner.

Bear in mind, whatever you decide, that Exchange of Contracts is the Taxable Event, not completion. It is this date that any CGT is due from.