Q: If I sell my rental property to my tenants at a discount, will Capital Gains Tax (CGT) be calculated on that price or the market value?
A: The answer primarily depends upon your relationship with your tenants. If they are not deemed to be “connected persons” (i.e. not relatives, business partners or part of a disguised gift arrangement), HMRC should base CGT on the actual sale price of the property.
However, if the discount is unusually steep or looks like an attempt at tax avoidance, HMRC could use the market value instead to calculate CGT. Either way, reporting and paying CGT on residential property sales must be done within 60 days of completion.