Chartered Surveyors North West

Taxation of Capital Gains - Capital Assets and Stock in Trade

Before 1962 a capital gain was generally free from taxation. In the Finance Act 1962 provisions were introduced to treat gains made in a short period, normally one year but three years for land, as income to be taxed accordingly. The Finance Act 1965 introduced a comprehensive system for the the taxation of long-term capital gains and the 1962 Act provisions were abolished finally in 1971. Thus, since 1965 there has existed a scheme for the taxation of capital gains, by which is meant gains realised when a capital asset is disposed of and the proceeds exceed the costs incurred in acquiring the asset.

These provisions apply to assets of a capital nature. In the case of property these would be the land and buildings owned by a person or company which they occupy or let as an investment. It is important to note that in some instances such property will not be regarded as capital but as stock in trade which is not subject to the provisions applicable to capital gains.

A Building Survey is an investigation into, and assessment of, the construction and condition of a building. It is based on a detailed inspection of the building in as much depth as is possible without damaging the building or contents. Our Building Survey is more comprehensive than most as it includes inspection by a Chartered Surveyor, a Structural Engineer as well as a report on the damp-proof course and internal accessible timbers by a British Wood Preserving & Damp-proofing Association member and also of the cavity wall ties within the exterior elevations, if present. The report will include guidance on maintenance and remedial works and often a detailed comment on individual defects.

A Building Survey is essential when purchasing period buildings, those with unusual characteristics or of unusual construction. It is equally suitable for modern traditional buildings.

Because of the individual nature of a Building Survey it is not possible to give any guidance on costs, as it is with the Homebuyers Survey and Valuation. The fee will vary according to the type, size, value and location of the property.

This report is based on a format drawn up by the Royal Institution of Chartered Surveyors It gives the prospective purchaser information on:-

• The general condition of the property.
• Any significant factors likely to affect materially the value of the property.
• The value of the property in the open market.
• The value for insurance purposes.

The information is provided in a simple and straightforward layout, easy to read and understand. It is based on a visual inspection of as much of the interior and exterior of the building as is accessible with safety and without undue difficulty, including roof voids, flat roofs accessible with a 3m (10ft) ladder, outbuildings, site boundaries, etc., and an overall impression of the services will be given. This type of report is suitable for most twentieth-century property, but structures which are unusual by virtue of design or construction, and particularly large properties may require a more detailed report and may not easily fall within the format. Your Surveyor will advise you during the preliminary discussion. The cost of the report will depend on the size and type of the property, its location and value. It is often not much more expensive than the basic mortgage valuation report and is far more wide-ranging and gives the buyer the information needed to make a more considered decision on the purchase.

The primary purpose of a mortgage valuation report is to provide an opinion to the lender as to whether a property is suitable security for the money to be lent.

Whilst the valuer will, of course, take into account the general condition of the building, his/her valuation will be based on only a brief and superficial inspection of the property. On a pro-forma sheet the space allocated for comment on the condition of the building is very limited. Remember that the lender lends to a person and it is that person who is liable for the building, its condition and maintenance. Whilst the building is important, it is to some extent secondary for the lender’s purpose.