Capital Gains Tax and Transfer Fees - Real Case

Last week I gave you advice on costs of buying and selling, so to start the week off, I thought I would give you an example of a recent email I received and the my response to it, as real life cases often have more impact on your understanding than a long list of do's and don't's!!! (Is there even such a word as don't's???) I have removed the name of my client for confidentiality reasons...

Anyway, have a read and if you have any questions or need advice, leave a comment and I will try and answer it for you...

She wrote:

"Hi there Nicky,

Hope you had a good weekend.  Was wondering if I could pick your brain a bit.  My dad has  been offered a house to buy but he's not sure if he trusts the guy very much.  He is saying that he has to pay capital gains tax but he is over 55 years old and has owned the property for about twenty years.  Also would you know who has to pay transfer fees and how much that would be on 130 thousand?  He says his brother in law is an estate agent but like I said he's not sure how trustworthy the whole thing is because of past experience with the same people.

If you have any info that I could give dad that would be awesome.  Thanks so much and have a good day"

I replied:

"On 14 Nov,2011, at 9:20 AM, Nicky Versfeld wrote:

Hi!

Hope you had a good weekend.

Firstly, if the guy is over 55 and the property is not his Principal Home, in other words he has been renting it out, then he will have to pay capital gains tax of 5% on the Purchase Price. If the property is owned by a company then he may have to pay capital gains tax. So your Dad needs to find out who is the legal owner of the property…ask to look at the title deeds. Then find out if he has been living there himself and if all the utility bills are in his name. If he owns it in his personal name, and has been living there then he won't have to pay capital gains tax.

The buyer pays the transfer fees and these are calculated on a sliding scale depending on the price, but usually they come to about 7% of the purchase price.

Where is the property and what does it have? I should be able to give you a guideline value.

My advice also is to pick your lawyer who will do the transfer as a precondition of the sale. I have lots of great lawyers who will be happy to do the transfer and I know they are reputable. Don't allow any money to be transferred to the seller until the title deeds are in your Dad's name and so even if the seller is a bit dodgey, you won't lose anything, just be a bit of a waste of time. You don't pay extra to use your own lawyers as the transfer fees are their charge.

Let me know if I can do anything else to help, and thanks for thinking of me to ask your questions!!!

Have a great week...

Nix                          

"

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