Basic Accounting Quick Help Required

[xto]

Hi all,

Kinda off the wall question, and I know that you will need much more detail to give accurate response but if we can try and help just with the information provided. ok here goes:

Person A Says: Due to the sales of certain properties, you will potentially be liable for a £6million tax bill if the sales where done using off shore companies and the beneficiaries are UK BASED.

Person B says: Am I right to to assume: to pay a £6million in tax would mean that you made circa £22million in profits in sales….. say that most property investors or developers only sell to show a 20% return on investments, that would mean that the total sales, to generate a £22million profit, which will then cause a £6million tax liability would need to be £110,000,000.+

does that make sense?

[Eric Mc]

xto said:

Hi all,

Kinda off the wall question, and I know that you will need much more detail to give accurate response but if we can try and help just with the information provided. ok here goes:

Person A Says: Due to the sales of certain properties, you will potentially be liable for a £6million tax bill if the sales where done using off shore companies and the beneficiaries are UK BASED.

Person B says: Am I right to to assume: to pay a £6million in tax would mean that you made circa £22million in profits in sales….. say that most property investors or developers only sell to show a 20% return on investments, that would mean that the total sales, to generate a £22million profit, which will then cause a £6million tax liability would need to be £110,000,000.+

does that make sense?

What's that got to do with accounting.

It sounds to me like a tax question.


To be honest, the question is so badly constructed it is hard to work out what your query actually is.
I don't therefore REALLY understand the question you are trying to ask.

1 - who is selling the property?
2 - are they running a property development business?
3 - of so, is the business operating through a limited company?
4 - is the company based in the UK or overseas?
5 - does the company actually own the property?

or

6 - have they PERSONALLY bought some properties as buy to let investments and are wishing to sell them

[Alpinestars]

It's an arithmetic question.

You're calculation is correct if the return required is pre tax. Using your numbers, if you want to know the sales required to get a post tax return of 20%, it would require sales of just over 150m ie (22m/.2)/1-(6/22).

[xto]

Hi,

The assumption is that in the uk one has to pay cgt at 28% on profits earned. This is based on uk property being transacted.

So if someone claims that the cgt payment is £6m then I was working backwards to see what would the the initial gross sale figure using the assumption that an investor in the property world would only sale to achieve 20% profit.

[xto]

Hi,

The assumption is that in the uk one has to pay cgt at 28% on profits earned. This is based on uk property being transacted.

So if someone claims that the cgt payment is £6m then I was working backwards to see what would the the initial gross sale figure using the assumption that an investor in the property world would only sale to achieve 20% profit.

[Eric Mc]

xto said:

Hi,

The assumption is that in the uk one has to pay cgt at 28% on profits earned. This is based on uk property being transacted.

So if someone claims that the cgt payment is £6m then I was working backwards to see what would the the initial gross sale figure using the assumption that an investor in the property world would only sale to achieve 20% profit.

Only if the CGT is being levied on an individual. Limited companies pay CGT at their top rate of Corporation Tax. Corporation Tax is charged at 20% on profits up to £300,000. The are on profits above £1.5 million is 21%. There is a marginal rate of 21.5% between £300,000 and £1.5 million.
In April 2015 CT is being simplified to a single rate of 20%.

[xto]

And if the companies are off shore then the question goes as to who is behind them and that person tax position as well as citizenship.

Then I assume the straight 28% tax rate is placed on the person if the person behind the off shore spv is a uk citizenship

[Eric Mc]

xto said:

And if the companies are off shore then the question goes as to who is behind them and that person tax position as well as citizenship.

Then I assume the straight 28% tax rate is placed on the person if the person behind the off shore spv is a uk citizenship

Don't forget, if a foreign owned company or a foreign based company makes a PROFIT in the UK, it will pay UK Cororation Tax on that profit. If the profit is derived from a Capital Gain, then it WILL pay UK Corporation Tax.

[Alpinestars]

xto said:

And if the companies are off shore then the question goes as to who is behind them and that person tax position as well as citizenship.

Then I assume the straight 28% tax rate is placed on the person if the person behind the off shore spv is a uk citizenship

You are probably referring to what is known as a S13 (TCGA) charge. It applies when an offshore company, not subject to UK CT, makes chargeable gains, eg the sale of properties.

In certain circumstances, the gains can be attributed to UK resident individuals.