Jennifer Adams outlines tax implications associated with the selling of a property below its market value.
There are various reasons why an owner sells a property at less than its market value. However, doing so can have serious tax implications, depending on the circumstances and the relationship between the buyer and seller, particularly if the sale is made to a family member.
While the intentions behind such transactions are often genuine, HMRC can compare sale prices with other similar properties, scrutinise these sales closely and use the market value as the sale proceeds instead of the actual proceeds.
'Arm’s length'
Typically, HMRC will accept the sale of a property for less than market value where the property is a main residence or a second home or buy-to-let property provided the transaction has been conducted at ‘arm’s
