Capital gains tax (CGT) is potentially triggered by the disposal of property and can significantly reduce the final proceeds achieved by the vendor.
On the surface, the calculation of CGT seems straightforward. Any property acquired after 31 March 1982 is valued against that date for CGT purposes. CGT for properties purchased prior to that date is based on the gain in value achieved since then (allowing for indexation and costs), using the 31/03/82 valuation as the benchmark.
However, there are many factors that can impact on the valuation. Tax relief is one. Evolving case law is another, and in some cases, CGT can be avoided altogether. Having comprehensive market data pre-1982 is also very important, including physical characteristics of property, the highway network and planning regime at that time, in addition to rents and deal information.
All too often, CGT calculations are undertaken hurriedly without the level of professional standards required by, say, an asset valuation. These valuers fail to realise that their valuations must adhere to the standards laid down by the Red Book, the valuation ‘bible’ of the Royal Institution of Chartered Surveyors. They should be comprehensive and thorough, which is also more likely to persuade the Valuation Officer of the taxpayer’s position.
We have valued in excess of £1.5bn of property for CGT purposes over the last three years, negotiating with the Inland Revenue on our clients’ behalf.
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