Property risk

George has just inherited a property from his mother with a market value of £250 000. The property is in poor condition and an estate agent has told him that if he spends £40 000 on a new kitchen new bathrooms and general redecoration it could be sold for £350 000.

George does not have £40 000 to spare so his friend Bill has offered him a loan. The loan will be interest free but George and Bill have agreed to split the profit equally.

I do not believe that these arrangements should be treated as trading transactions. Neither George nor Bill works in the property industry and neither has a history of similar transactions although Bill does own several buy-to-let properties.

I therefore think that George as sole owner of the property will be taxed on a capital gain of £60...