Capital gains tax query on sale of investment property

Looking for some advise please !
We have the opportunity to buy a property as a buy to let adjacent to our current family home . The site on which our home was built formed part of the original folio of said property now for sale . The owner inherited the property in 2004 which included a large garden . In 2007 we bought this garden for 75k & the folio was split . Owner now selling the house but is telling us he has to cover the cost of the CGT liability on the sale . Would he have previously paid CGT when we bought the site in 2007 ? And the remaining house was then revalued stand alone . So the basis of his CGT is now based on the difference between what the house was revalued at in '07 stand alone versus proposed value today ? Hope this makes sense !

That all sounds weird. You're buying the house off him. The price is whatever you agree to buy it for. How has his CGT liability got anything to do with you?

In order to keep his CGT liability at a minimum is it not in his interest to sell the house at the 'lowest price' given that it's payable at a rate of 33% on the profit amount - win win for us & him ? We have first refusal but haven't made an offer yet . The house isn't officially on the market yet

Chazzer said:

is it not in his interest to sell the house at the 'lowest price' given that it's payable at a rate of 33% on the profit amount

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Not really. Cause he'd lose out on the 67% he gets to keep? Unless I'm missing something.

By the way, if he sells to you below market value, technically it shouldn't matter since he should pay CGT based on market value in that scenario.

Soooooooooo.........

A inherited a house and garden in 2004. He has a base valuation for both in 2004.

He sells the garden. He may or may not have had a CGT liability/ paid CGT - nothing to do with the purchaser.

His base valuation for the house remains as at the apportioned 2004 valuation - it, the house, would not have been re-valued. By anyone. He was not selling the house so he had no gain.

A is now selling the house. It is possible that he had a high base valuation in 2004 - near enough to the height of the boom- and that the current market value is in or around what the property was valued at in 2004.

It may also be that there was a low base valuation attributed in 2004 - especially if A had a potential CAT liability on the inheritance.

This is quite common - people sometimes think that a low value for Probate is a good thing. Except it may not be when it comes to a sale, down the line. And the sale price is way higher than the Probate valuation so now they have a CGT liability.

The house now has a value- its whatever something similar would sell for in the locality - now, we'll be told there is nothing similar!

Call it 200K- or any other figure plucked from the sky? Is that a realistic market value? Or so low that it will trigger a Revenue enquiry?

Revenue have an astonishing breadth of knowledge of valuations for CAT, CGT and stamp duty so any variations are likely to trigger Revenue interest.

For the OP - if you want to buy the house, make an offer of what you think it's worth. If the vendor wants more or less, that's up to them.

mf

It's an old 2 bed house realistically worth 110k currently , it is habitable & has been rented continuously . So in effect if the value of the house back in 2004 was 110k & the sale price today goes through at 110k , am I right in saying he wouldn't have any CGT liability to pay now ... as CGT is only paid on the 'gain/profit' amount ? I just have my doubts that he is telling us he has to pay CGT in order to achieve a higher sale price when in fact there may be no liability to pay .. given the site / garden we bought in 2007 for 75k made up approx two thirds of the overall folio.

Ignore. His. Capital. Gains. Tax. Liability.

Seriously, you're going off down the rabbit hole on this one.

The property is only worth what it's worth to you. His CGT liability or lack of one is only window dressing on his pitch to sell. Just keep nodding and ask him what his price is. Not what his CGT liability is. What his price is.

mf

You cannot fool Revenue. Vendors tax issues are his. They are not yours. As others have said, if you are interested, put in a bid. Any tax issues for Vendor are his.