CGT how to calculate if I built and did not buy my house

[DaisyB]

Hi, I along with sibling built house 2000. Seĺling house now, the valuation for purpose of mortgage, was done before building large shed, and doing all landscape, hedging etc. Can i get another retrospective valuation for 2000?

 

[T McGibney]

Hi, I along with sibling built house 2000. Seĺling house now, the valuation for purpose of mortgage, was done before building large shed, and doing all landscape, hedging etc. Can i get another retrospective valuation for 2000?

You must have a fair idea of what all that development activity cost you in 2000 and subsequently?

I'd recommend you get professional accountancy or tax advice.

 

[Bronte]

Surely you have the 2000 value, you have current value, and you have the expenditure costs for the shed/landscaping. I don't see how you could change the 2000 value when it was real.

Revenue don't' know the value you put on it for the mortgage. In case that is your problem, which you don't state. Because it would not be unusual for people applying for mortgages to build to state the site was worth more than it's true value.

 

[jpd]

The valuation for mortgage has no bearing on the acquisition cost used for the CGT calculation

They may be similar or not

 

[DaisyB]

Thanks for the replies. As it was built 24 yrs ago, I have copy of mortgage, bank valuation, and some but not all receipts for spending on build.

 

[Dr Strangelove]

The valuation for mortgage has no bearing on the acquisition cost used for the CGT calculation

I think it’s better than anything else TBH.

 

[T McGibney]

I think it’s better than anything else TBH.

It's totally irrelevant and a mistaken reliance on an obvious red herring would leave the OP totally exposed if their eventual CGT payment is inadequate.

As I suggested above, they should get themselves proper professional advice.

 

[Dr Strangelove]

A contemporaneous valuation by a professional valuer is better than anything else.

Valuers engaged by lenders generally tend to be conservative. This will mechanical serve to increase, not decrease, the base for CGT

 

[T McGibney]

A contemporaneous valuation by a professional valuer is better than anything else.

That assumes market value on completion matched build cost.

Me, I'd prefer an historic costs estimate by a QS than any assessment of market value.

 

[Villaines]

Strictly speaking, the legislation currently says that the only historic date at which a valuation supplants cost where an asset is owned is 6 April 1974, because for the purposes of CGT any asset owned on that date is deemed to have been sold and re-acquired at its market value. After that, a person is supposed to have a full record of all the costs of purchasing, building or enhancing a property that they have owned since that time.

There is absolutely no doubt that the government should look at bringing forward this date by multiple decades in order to simplify record keeping, perhaps even to 1994 or dare I say it, 2004, but if that is done, there would inevitably be winners and losers, and it requires a robust review of the entire CGT system because the government wants to know what it stands to lose. Personally I think they should introduce legislation for an optional more recent historic date where a valuation can supplant cost in order to simplify the system if the taxpayer has lost records.

In the UK, they still use 31 March 1982 as the historic backstop date (albeit there is a different system for non-res UK property owners that was introduced more recently).

The normal concept within tax law that records need to be retained for only 7 years doesn't apply when it comes to property owned more than 7 years - a full record of capital expenditure needs to be retained.

Obviously when records are lost, a valuation at the historic date of purchase might be useful but as others have said, market value doesn't necessarily correspond to the cost of buying and building.

Incidentally, the OP will appreciate that cost indexation will be allowed for any expenditure prior to 2003. The indexation rate is determined by date (well, tax year). Expenditure is multiplied by 1.193 if incurred in the year to 5 April 2000, or 1.144 during the year ended 5 April 2001.

From the Revenue:

When do you use market value?​

You will need to use the market value of the asset to work out your chargeable gain if:

• it was a gift to someone other than your spouse or civil partner
• you sold it for less than it was worth to help the buyer
• you inherited it and are now disposing of it
• you bought it before 06 April 1974.

 

[daheff]

i think the first question to ask here is why do you think you have a CGT liability? Was this your home since it was built? For part of the period or none of the period?