Part-exchange schemes offered by new-build developers have become a common route to selling, particularly in a slow market. The developer takes your existing property and credits its value against the purchase price of the new home. It feels like a property swap, but for tax purposes it is a disposal — and if the property you hand over is not your main home, CGT may be due.
Is a part-exchange a CGT disposal?
Yes. A part-exchange is treated as a disposal of your existing property at whatever value the developer has ascribed to it. For CGT, the proceeds are the market value (or deemed value) at which the property has been exchanged, not the original asking price or the new build purchase price.
If the developer offers you £180,000 for a property worth £200,000 on the open market (developers typically offer below market value), the CGT disposal proceeds are £180,000 — not £200,000. You cannot substitute a higher market value unless the transaction is with a connected person.
When is CGT due?
CGT on the part-exchanged property only arises if it is a chargeable asset. If the property you are handing over is your only or main home and has been throughout your ownership, Private Residence Relief covers the full gain and no CGT is due.
CGT becomes relevant when the part-exchanged property is:
- A buy-to-let or investment property
- A second home you have not nominated as your main residence
- An inherited property you have not lived in
- A property that was once your main home but ceased to be before the part-exchange (depending on the gap and the nine-month final period rule)
The 60-day reporting requirement
If CGT is due, the 60-day reporting clock starts from the completion date of the part-exchange transaction — the date the developer legally takes ownership of your property. This is typically the same date as your purchase of the new build completes.
You must file the CGT property return and pay the tax within 60 days of that completion date, regardless of whether you have received any cash. The fact that the "proceeds" were applied to the new build purchase does not defer the payment.
Practical complications
Valuation disputes: If you believe the developer's offer price significantly undervalues the property, you may want to obtain an independent RICS valuation at the time of the transaction. This is particularly important if you are reporting the disposal proceeds on a CGT return — you want to use the correct figure, not a figure that HMRC might later challenge as being above or below market value.
Timing: In a part-exchange, the developer effectively sets the timetable. You may not know the exact completion date far in advance, which can make planning the 60-day return harder. Note the completion date from your solicitor's completion statement and count forward.
Simultaneous transactions: Where exchange and completion happen simultaneously (as is common with new-build part-exchanges), both the disposal date (for the tax year) and the 60-day clock start on the same day.
The gain calculation
The gain is calculated in the usual way:
- Proceeds: the value credited by the developer for your existing property
- Less: purchase price, SDLT, buying costs, improvement costs, selling costs (noting that in a part-exchange there may be minimal estate agent fees)
- Equals: gain before Annual Exempt Amount
If you used the part-exchanged property as a main home for part of your ownership period, PRR applies proportionately to the period it was your main residence (plus the final nine months).
Can you defer the CGT using the new build as a replacement asset?
No. Rollover Relief (deferring CGT by investing proceeds in a replacement business asset) does not apply to residential property used as a private dwelling. There is no equivalent deferral mechanism for residential property part-exchanges.
If you are approaching a part-exchange involving a buy-to-let or investment property and CGT will be due, the 60-day deadline applies from the completion date of the transaction. A Chartered Accountant/Chartered Tax Advisor can prepare the return and make sure the right value is used, particularly where the developer's offer price and the true market value may differ.