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Old 02.02.2021, 18:14
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UK Property affected by Cladding Issue - Tax Impact in Zurich

Hiya!


Lovely to meet you all.



I own a property in the UK that is currently affected by the cladding issue plaguing thousands of high rise blocks all over the country.



Essentially since 2018, my flat is valued at 0 until our housing association can arrange for the cladding inspection and then any repairs that maybe required.


As a result of this, I can neither sell the property or can anyone buy it as mortgage lenders aren't willing to lend unless the property has been certified as safe (EWS 1 certificate).



Now in my Zurich Tax return, I have been listing the value of my property for wealth tax purposes - the last time I had it valued was in 2017 and I was putting down that value and then deducting my outstanding mortgage amount for the wealth tax calculation.


Theoretically, if my flat is actually valued at 0 and there is no indication of when exactly (covid hasn't helped) my tower block will be certified. Could I put the value of my property as 0 in my tax form? This would have an impact on the Eigenmietwert calculation and also the overall wealth tax amount as I still have to pay the outstanding mortgage balance.



I think this would probably be too cheeky, but just wanted to get some input from the experts here .


Cheers!
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Old 02.02.2021, 19:08
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

If you can support the zero valuation with a report from a chartered surveyor (RICS) stating the value as £0 you’re good.
Realistically, you will struggle to get that because even with the cladding issues it has a value. Ask yourself, if you were forced to sell the property at any price what would you get for it? That’s the fair value that a surveyor would assess it to be. Here’s a random example of an apartment in Sheffield going to auction tomorrow with pre-disclosed cladding issues and a guide price of £82,000. Link
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Old 03.02.2021, 09:45
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

Thank you GParker - I think that makes sense. I will just stick with the 2017 official valuation figure then. There is no realistic way for me to get an updated figure prior to submitting my current return.



I haven't got my 2018 or 2019 Tax returns back yet, and from reading this forum this is expected and could take a while so if the tax authority wishes to see evidence of my valuation figure I can discuss it with them at the time.


Cheers
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Old 03.02.2021, 09:52
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

I will buy it off you for £10, that's over your valuation. Will you sell it?
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Old 03.02.2021, 14:16
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

He claims that no-one *can* buy it, therefore the value is 0, so your £10 wouldn't work as the claim is it can't be sold in its current state.



What you can also do it work out what you could rent it for and work backwards to a valuation from that.
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Old 03.02.2021, 14:33
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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He claims that no-one *can* buy it, therefore the value is 0, so your £10 wouldn't work as the claim is it can't be sold in its current state.



What you can also do it work out what you could rent it for and work backwards to a valuation from that.
It can be sold. Just not to a buyer who requires a mortgage.
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Old 03.02.2021, 14:41
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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He claims that no-one *can* buy it, therefore the value is 0, so your £10 wouldn't work as the claim is it can't be sold in its current state.



What you can also do it work out what you could rent it for and work backwards to a valuation from that.
read again. nobody is willing to give a mortgage on the property. i don't need a mortgage for £10.
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Old 03.02.2021, 14:47
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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Hiya!


Lovely to meet you all.



I own a property in the UK that is currently affected by the cladding issue plaguing thousands of high rise blocks all over the country.



Essentially since 2018, my flat is valued at 0 until our housing association can arrange for the cladding inspection and then any repairs that maybe required.


As a result of this, I can neither sell the property or can anyone buy it as mortgage lenders aren't willing to lend unless the property has been certified as safe (EWS 1 certificate).



Now in my Zurich Tax return, I have been listing the value of my property for wealth tax purposes - the last time I had it valued was in 2017 and I was putting down that value and then deducting my outstanding mortgage amount for the wealth tax calculation.


Theoretically, if my flat is actually valued at 0 and there is no indication of when exactly (covid hasn't helped) my tower block will be certified. Could I put the value of my property as 0 in my tax form? This would have an impact on the Eigenmietwert calculation and also the overall wealth tax amount as I still have to pay the outstanding mortgage balance.



I think this would probably be too cheeky, but just wanted to get some input from the experts here .


Cheers!
The valuation is for a sale at midnight on 31/12 , it would always be a lowish figure however I believe you are justified in valuing it very low & likely substantially less than your mortgage. Plenty of newspaper articles to back up a minimal valuation, they could ask for further info but would probably have to accept when they saw the evidence.
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Old 03.02.2021, 15:33
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

Thank you all - Phil_MCR and HickvonFrick are correct in that it can be sold to cash buyers - the issue here is that no one really wants to buy a flat located in a tower that isn't certified and safe, and those that still wish buy are asking for significant discounts - up to 25%.


Its been a nightmare really, I am basically trapped - I can't sell, I can't remortgage and we are just crossing our fingers that our cladding is inspected and certified this year.


I'll take fatmanfilms advice and value it at the lower end and see what the tax authorities say.


Thanks very much!
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Old 03.02.2021, 15:43
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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...and those that still wish buy are asking for significant discounts - up to 25%.
Substantially different to 100% discount.


Some people take use the probate valuation or "webuyanyhouse.com" valuation. Mine was rented well below market value which resulted in a low valuation and a lower increase in tax rate, but you have to consider potential UK capital gains issues.


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Its been a nightmare really, I am basically trapped - I can't sell, I can't remortgage and we are just crossing our fingers that our cladding is inspected and certified this year.
Must surely be a nightmare.
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Old 03.02.2021, 15:52
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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, but you have to consider potential UK capital gains issues.
Indeed, this reduces the value of the asset. For example a 100k tax liability on the sale, that 100k must be accounted for in the valuation as well as other selling costs.
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Old 03.02.2021, 16:20
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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I find that hard to believe. Just my opinion.
I find it incredible that you don't understand the concept. Just like the mortgage is a liability, CGT & all associated sale costs. If you sold the property you would be left with a lower figure than the agreed price.
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Old 03.02.2021, 16:34
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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It can be sold. Just not to a buyer who requires a mortgage.
Also only to someone that can afford massive future (and often present) service charges.
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Old 03.02.2021, 17:00
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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Also only to someone that can afford massive future (and often present) service charges.
Clearly that is why the value will be hugely lower than it would otherwise have been - but it won't be zero.
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Old 03.02.2021, 19:34
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

What do the Zürich Steueramt accept as evidence in support of a house valuation?
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Old 03.02.2021, 20:35
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

They've always accepted my own valuations except for one occasion when I wrote down the value by 50% due a severe flood. They noticed and asked why. I sent them a surveyors report, which they accepted.
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Old 03.02.2021, 22:02
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

We've been in the same type of situation in Scotland since 2016, not cladding issues, but the house we bought before moving to Basel was on a development that subsided due to a coal seam underneath the car park area. The development had formerly been an old factory and offices and what is now the car park had a roof over it, the developer removed it, didn't get the ground stabilised properly and exposure to bad weather caused a collapse, initially it was just the car park wall. They also built 2 new town houses on pillars that had to be demolished as they were condemned.

The authorities had to get involved and we've all had 5 years of hell with them dragging their heels, missing deadlines etc, surveyors and engineers disagreeing etc. The remedial work is finished but unknown to the owners and their solicitors, the government authority handling everything did an out of court deal with the developer. None of us can sue him in court because of this deal, we are not permitted to know the details and we won't get compensation.

We couldn't sell or let because the back of our house was attached to a garden wall that moved. The agents who valued it for the rental market also said the amount of building work going on could put people off. I'd hoped to let it out last year but can't get back to empty out what's left of the furniture and get a decorator in. Selling is out of the question, solicitor says it'll be another 5 years before it reaches market value. To add further insult the developer bought an affected house in a street over the back at auction and by law the government authority had to give him the money to renovate it

For our tax returns we put a value on it of 100k GBP, we paid 154k in 2014 and it should have been worth IRO 185 - 190k by now as it's on a private gated development in a central location. We wrote a letter of explanation for the low valuation and that was accepted.
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Old 04.02.2021, 20:00
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

This girl was a first time buyer at 27, bankrupt at 28 due to cladding.

https://www.bbc.com/news/av/business-55847260
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Old 04.02.2021, 22:14
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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This girl was a first time buyer at 27, bankrupt at 28 due to cladding.

https://www.bbc.com/news/av/business-55847260
Should have bought an unfashionable 3 bed semi further out. Post-grenfell I just wouldn't buy in one of those high rises.

Easy to make a mistake when you are young though - poor lass.
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Old 05.02.2021, 09:20
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Re: UK Property affected by Cladding Issue - Tax Impact in Zurich

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Substantially different to 100% discount.


Some people take use the probate valuation or "webuyanyhouse.com" valuation. Mine was rented well below market value which resulted in a low valuation and a lower increase in tax rate, but you have to consider potential UK capital gains issues.


Must surely be a nightmare.

Thank you - yes, I think I answered my own question. The funny thing is the mortgage lenders just aren't willing to put any value on the property. We have shared ownership flats in our block too - for shared owners, they were actually keen to capitalise on this situation to have a lower valuation so they can staircase to 100% ownership cheaper - and for full owner's like myself, we obviously want the price to be as high as possible and interesting tug of war.


I used to see a valuation on Zoopla for my property, but post grenfell they have stopped putting any value on flats in our area.
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