I have sold a property but i am to be paid by 6 instalments

Question

i have been told i have to pay capitol gains tax on the full amount in the first year can anyone tell me if this is true

Answer 1

I have never heard of anyone selling a property on an HP basis. But according to the bean counters I guess you have sold it for an agreed price regardless of whether the buyer now owes you money.  

Answer 2

If you made the arrangement to reduce your Capital Gains Tax liability by spreading it over more than one tax year it would have been sensible to check with the Revenue first. Have you made it plain to them what the financial arrangement is? if so I suspect that you are stuffed. They are hard b******s, after all they can get as quick as they can get it.

Answer 3

This is complicated so I hope I can explain it clearly enough.

You are liable for the capital gains tax on the whole amount in the year in which the disposal occurred.

But, where the sale proceeds are payable in instalments you can defer payment of the tax.

Basically, HMRC will take all of the amount you have received until the full amount of the tax has been covered.  So you need never be out of pocket but you will not see any of the proceeds until HMRC have had their cut.

Interest will accrue on the unpaid tax that is deferred in this way.

Answer 4

This is most likely true.  The capital gains accrue upon purchase (I say likely, since it could be that your gains are beneath the amount needed for the gains to take effect).  In effect, the installments are a second transaction in which you are making a loan to the buyer(s).  If you are charging interest, you will need to claim the interest on your taxes as income.