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CGT question on unregistered property.
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ANDREW FOSTER
Posted: 06 May 2020 20:06:07(UTC)
#1

Joined: 23/07/2019(UTC)
Posts: 8,125

Hi all, I wonder if anyone can offer an opinion on the following situation.

A friend on ours owns 8 houses in a complete terrace and they have been in the family for over 100 years. As a result most (but not all) are unregistered with the UK Land Registry.

They are presently rented out, though some are empty.

They are considering selling, ideally as a "job lot" though may also consider selling individually either before or after registering.

My question is will CGT be payable on the properties and if so, how will it be calculated since there are no records of original transaction prices (or they will have been sold for a few hundred pounds in the 1910's )

Thanks in advance for any opinions (obviously not taken as advice )
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Tim D
Posted: 06 May 2020 22:20:15(UTC)
#2

Joined: 07/06/2017(UTC)
Posts: 8,883
Do they own the properties within a company wrapper, or as a private individual?

Either way there is no getting away from tax on gains except on your own primary residence. Whether or not the properties are registered with the Land Registry is irrelevant (although that'll presumably need sorting out as part of a sale).

(Vast swathes of the country are still unregistered because registration on sale was not compulsory until 1990 and on inheritance until 1998; more on this at https://whoownsengland.o...ands-unregistered-land/ )

I doubt CGT is due on the gain from 100 years ago. More likely it'll be due on the gain since you friend presumably inherited the properties (or since March 1982 if in a company; less sure about the privately owned situation and whether 1982 is a similar cut-off but the RICS page below and pages like https://www.fennwright.c...ues-why-do-they-matter/ suggest the same applies).

Funnily enough I've been helping a relative in a similar position. Their properties are in a company so the treatment will be different to directly held ones (gains subject to corporation tax rather than CGT), but info we've found useful on historic valuations for tax purposes:

General advice:
https://www.ricsfirms.co...nd-commercial-property/
https://www.gov.uk/gover...price-indices-in-the-uk

In practice these seemed to be the only tools which could give a useful 1982 value:
https://www.nationwide.c.../house-price-calculator
(or https://www.nationwide.c...ice-index/download-data may have more detailed data)
https://landregistry.data.gov.uk/app/ukhpi (big green button on page takes you to the data)

Council tax banding may be useful for sanity checking valuations especially if you need a 1992 value: https://www.moneysavinge...uncil-tax-bands-change/

For company held property, you get to apply indexation up to 2017 (but for individuals, that's not an option; maybe there are other reliefs):
https://www.gov.uk/tax-w...k-out-a-chargeable-gain
https://www.gov.uk/gover...exation-allowance-rates
https://www.gov.uk/gover...allowance-december-2017

You can get HMRC to pre-approve valuations before submitting them in a tax return:
https://www.gov.uk/gover...-for-capital-gains-cg34

And finally: http://www.britishnewspaperarchive.co.uk/ might be useful for looking up old estate agent listings in local papers. (Much content paywalled but you should be able to get free access by a local library's PCs, or at least you could if the librarys were open).
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jeffian
Posted: 06 May 2020 22:30:04(UTC)
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Andrew, this is too important to seek "opinions" on a chat forum, your friend needs to consult an accountant. Yes, of course, CGT is going to be involved. It is immaterial how long an asset has been held and the original cost is irrelevant; all values for CGT purposes were 're-based' at 31/3/82 (so that is your starting point), indexation was allowed up to 1998 (cost adjusted in line with RPI to allow for inflation) and indexation ceased in 2008. Your 'cost' calculation for an asset held pre-1982 will be 31/3/82 value + indexation up to 1998 when it was frozen. All gains above that are taxed. I'm not an accountant, I just pay a lot of tax, so this should not be relied upon and proper advice should be sought.
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2 users thanked jeffian for this post.
Tim D on 06/05/2020(UTC), ANDREW FOSTER on 07/05/2020(UTC)
Tim D
Posted: 06 May 2020 22:38:42(UTC)
#5

Joined: 07/06/2017(UTC)
Posts: 8,883
Yes I'll add that my relative has an accountant involved and I wouldn't want to tackle this sort of thing without one. It was them who gave us the job of going off and figuring out a 1982 March valuation; we will have another conference call with them soon.
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jeffian
Posted: 07 May 2020 11:34:52(UTC)
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Most qualified valuers (RICS or equivalent) should be able to provide 1982 property valuations as it is quite a common question and there is a database.
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D Bergman
Posted: 07 May 2020 12:18:44(UTC)
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If the property is privately owned (rather than through a Trust or a company) the relevant starting point for CGT calculation would be when the current owner inherited the property.

The valuation for probate would be, in effect, the buying price for any assets.
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ANDREW FOSTER on 07/05/2020(UTC)
ANDREW FOSTER
Posted: 07 May 2020 12:34:03(UTC)
#4

Joined: 23/07/2019(UTC)
Posts: 8,125
jeffian;11465 wrote:
.. all values for CGT purposes were 're-based' at 31/3/82 (so that is your starting point), indexation was allowed up to 1998 (cost adjusted in line with RPI to allow for inflation) and indexation ceased in 2008. Your 'cost' calculation for an asset held pre-1982 will be 31/3/82 value + indexation up to 1998 when it was frozen.


Thank you... :) I did not know about this rebasing at 1982 values, that is a big help.

I'm not advising the person, just giving a bit of help as to what they might expect.

They aren't held in a wrapper or via a company.... the owner is a farmer who inherited the properties many years ago.

Thanks for yours and others comments much appreciated
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ANDREW FOSTER
Posted: 07 May 2020 12:36:41(UTC)
#8

Joined: 23/07/2019(UTC)
Posts: 8,125
D Bergman;114717 wrote:
If the property is privately owned (rather than through a Trust or a company) the relevant starting point for CGT calculation would be when the current owner inherited the property.

The valuation for probate would be, in effect, the buying price for any assets.


The properties are privately owned. I don't know at the moment when the current owner inherited I will ask them.

Thank you :)
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D Bergman
Posted: 07 May 2020 13:11:48(UTC)
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ANDREW FOSTER;114720 wrote:
D Bergman;114717 wrote:
If the property is privately owned (rather than through a Trust or a company) the relevant starting point for CGT calculation would be when the current owner inherited the property.

The valuation for probate would be, in effect, the buying price for any assets.


The properties are privately owned. I don't know at the moment when the current owner inherited I will ask them.

Thank you :)


Have a look at this Which? site - it might be helpful (there is a section called CGT on gifted and inherited homes):

https://www.which.co.uk/...avuq96u1500f#headline_9

EDIT:
I hate to add to the complexity but just noticed you mentioned that the owner is a farmer.
There a special IHT relief called Agricultural Property Relief on farm cottages, but this is dependent on the tenants of the property being farm employees or connected in various ways to the farm. If this was the case, there may be other regulations regarding the eventual sale of these properties.

https://www.gov.uk/guida...lief-on-inheritance-tax

I have no idea if and how this applies, but possibly something the owner needs to consider when checking with an expert.
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