Question:
A close friend (non-relative) of mine will shortly be transferring three properties across to me at no cost; I will not pay anything for them. She owns the properties outright and there is no debt secured against them. There are personal reasons for this, which are perfectly legitimate i.e. this is not an attempt of falsifying bankruptcy etc.
My intention is to rent out two of the properties and sell the third at its current market price of £230,000. Given that I have never lived in this property, I assume I will be liable for CGT. However, I am unsure how to calculate this especially given that I paid £0 for the property.
Arthur Weller Replies:
If you look at page CG14530
(http://www.hmrc.gov.uk/manuals/cgmanual/cg14530.htm) on the HMRC Capital Gains Manual, you will see that in certain situations 'market value' is substituted, for taxation purposes, for the consideration that changes hands. The amount that the recipient/purchaser of the asset actually pays the donor/seller is ignored.
Instead the consideration is deemed to be equal to the market value at the date of disposal. The same figure is used as the acquisition cost of the person who acquires the asset. Your circumstance is one of those situations. Therefore, if you sell the property for £230,000, i.e. no more than its current market value when you acquired it, you will have made no gain and therefore have no CGT to pay.
