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Capital gains on investment properties

  • 31-12-2020 6:54pm
    #1
    Hannibal_12
    Registered Users, Registered Users 2 Posts: 366 ✭✭


    Hi all,
    Just quick query. My dad owns 3 buy to let properties. Essentially was wondering if surrenders them or if the bank "takes them back" will he still be liable for CGT as he has no funds to pay it. He remortgaged one to buy the next etc.

    Thanks


Comments

  • #2
    Geuze
    Registered Users, Registered Users 2 Posts: 14,033 ✭✭✭✭Geuze


    Hannibal_12 wrote: »
    Hi all,
    Just quick query. My dad owns 3 buy to let properties. Essentially was wondering if surrenders them or if the bank "takes them back" will he still be liable for CGT as he has no funds to pay it. He remortgaged one to buy the next etc.

    Thanks

    CGT might be relevant if the properties have risen in value compared to the purchase price paid.

    But if that was the case, then it is possible to repay any mortgage.


  • #3
    Maximus47
    Registered Users, Registered Users 2 Posts: 15 ✭Maximus47


    If he makes a gain on the properties, cost versus bank consideration, he is liable to cgt. Any loss on any of the properties is available against profit on future sales. I imagine overall he owes the banks less than the values so the bank should be giving him money. If he still has a problem and there is CGT and no funds he can seek an installment arrangement with revenue.


  • #4
    Fedlot
    Registered Users, Registered Users 2 Posts: 15 ✭Fedlot


    Hannibal_12 wrote: »
    Hi all,
    Just quick query. My dad owns 3 buy to let properties. Essentially was wondering if surrenders them or if the bank "takes them back" will he still be liable for CGT as he has no funds to pay it. He remortgaged one to buy the next etc.

    Thanks

    Your dad needs to get tax advice on this . There are loads of different scenarios and a bit of advance tax advice would be well worth it . Every case is different and the history of what happened and what was claimed would need to be looked at.
    It may not be straightforward as it sounds. Eg If the bank has written off part of the loan then that can reduce the original cost of the property and so if the sale proceeds exceed this “new base cost” then there may well be a capital gain . Your dad would also want to check if he claimed any interest on the loan against rents as if that interest wasn’t actually paid but added to the loan balance, then that can also be added backed to income.
    On the otherside, there may be an opportunity to negotiate that any settlement with the bank factors in any taxes due . Another point is that your dad may also have claimed capital allowances on part of the properties against other incomes and that also can trigger a tax liability .
    Lastly, when all the above is sorted, your dad may have other losses which he can use/ create to offset any gain .
    Be careful also when the three properties are disposed of as you cannot carry a loss back , only forward —- so as a rule make sure the losses occur before the gain or in the same year .
    Get some tax advice .


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