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Cashback deals

21 July 2009
Issue: 4215 / Categories: Forum & Feedback , Capital Gains
A client has purchased properties, but has received cashback in returned deposits, etc. What are the income tax or capital gains tax implications of such payments?

A client of mine has recently acquired a residential letting property whereby he has had most of his 25% deposit returned as part of the deal.

This has effectively enabled him to obtain a 100% mortgage from the bank which I understand is fully aware of the position.

For example the property has been RICS valued at £100 000 (this is the declared figure on the Land Registry) on which the bank has lent £75 000. My client paid the solicitor £25 000 which was subsequently returned by the vendor after deducting the vendor’s deal costs. The property has therefore effectively cost £75 000.

My client has also entered into another similar arrangement but on this occasion the vendor paid the 25% deposit and also paid my client a £5 000 ‘cashback’ representing less than 5% of the purchase price.

I would appreciate readers’...

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