Conservatives to scrap CGT tax for landlords selling to tenants – but could it create a dangerous loophole?

By admin Jun13,2024

The Conservative Party would cut scrap Capital Gains Tax in situations where landlords sell to their tenants.

This tax cut would last for two years, and would be designed to free up housing stock and help tenants get on the ladder.

The Conservative manifesto estimated the pledge would only cost £20 million a year, which suggests the party wouldn’t expect the takeup to be substantial.

However Graham Boar, partner at accountancy group UHY Hacker Young, reckoned this manifesto pledge is in danger of creating a major tax loophole.

He said: “The proposed CGT relief for landlords selling properties to tenants will be ripe for abuse unless the law is drafted very carefully.

“There’s a risk that landlords selling properties will structure them as tenancies leading to sales, avoiding huge amounts of Capital Gains Tax.

“A landlord could also sell a property ‘on credit’ to a tenant, who could then sell it on with no gain and pay back their debt to the landlord. Either way, HMRC would miss out on huge amounts of tax.

“Drafting the law in a way that avoids the risk of tax avoidance is likely to make it very complex and difficult for taxpayers to understand. Nobody wants to see an even more complicated tax system in the UK.”

Some £1.7 billion in Capital Gains Tax was raised in 2022/23 (year end April 5) from sales of second or further homes, HMRC data shows. The majority of these are sales of investment properties by buy-to-let landlords.

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