any clever property tax advisors out there?
Discussion
Just realised that any profits on a soon to be completed property deal will not be dealt with by CGT - as I bought the plot to build houses etc it will come under income tax.
I expect it would be more efficient to do the properties as a company and pay corporation tax rather than 40% income tax. Is there a clever way to do this, bearing in mind construction has started?
The properties are in joint names (me & the wife) as tennants in common with 50% share. If I transfer to a ltd co, would there be stamp duty on the transfer?
I expect it would be more efficient to do the properties as a company and pay corporation tax rather than 40% income tax. Is there a clever way to do this, bearing in mind construction has started?
The properties are in joint names (me & the wife) as tennants in common with 50% share. If I transfer to a ltd co, would there be stamp duty on the transfer?
I can highly recommend these guys, they're about to save me a lot:
www.premier-strategies.com/flash/
www.premier-strategies.com/flash/
How have you found out that CGT won't supply?
I presume because the sale of the finished properties will constitute a series of transacttions rather than a one off Capital Transaction?
If this is indeed the case, you have already commenced trading and should have notified the Revenue within three months of commencement of the trade.
Regarding the transfer of the properties to a limited company, have you checked out the tax implications of that transaction?
My take on that would be that the transfer of the properties (if made all in one go) could be construed as a Capital Gains transaction, so you and your wife could avail of the personal Capital Gains Allowances. If no consideration (i.e. money) passes between the company (the buyer) and you and your wife (the seller), the value used for calculating the Capital Gain arising would be the Market Value at the date of the transfer. Whilst this may effectively trigger the Capital Gain reliefs available to you as individuals, the upshot is that you may have a CGT liability to pay but no incoming cash to fund it - so it mau not be feasable move.
Once the properties belong to the limited company, the company will pay Coprporation Tax on its trading profits.
However, you as individuals will also pay Income Tax (and possibly National Insurance)on any personal monies withdrawn from the company although there are ways and means in which this tax can be mitigated (or even wiped out completely).
I presume because the sale of the finished properties will constitute a series of transacttions rather than a one off Capital Transaction?
If this is indeed the case, you have already commenced trading and should have notified the Revenue within three months of commencement of the trade.
Regarding the transfer of the properties to a limited company, have you checked out the tax implications of that transaction?
My take on that would be that the transfer of the properties (if made all in one go) could be construed as a Capital Gains transaction, so you and your wife could avail of the personal Capital Gains Allowances. If no consideration (i.e. money) passes between the company (the buyer) and you and your wife (the seller), the value used for calculating the Capital Gain arising would be the Market Value at the date of the transfer. Whilst this may effectively trigger the Capital Gain reliefs available to you as individuals, the upshot is that you may have a CGT liability to pay but no incoming cash to fund it - so it mau not be feasable move.
Once the properties belong to the limited company, the company will pay Coprporation Tax on its trading profits.
However, you as individuals will also pay Income Tax (and possibly National Insurance)on any personal monies withdrawn from the company although there are ways and means in which this tax can be mitigated (or even wiped out completely).
Edited by Eric Mc on Friday 27th April 08:00
I stumbles across a property tax Q&A site, where it seemed to be made plain that buying a property with the intention of renovating and selling was a 'tradeing income' subject to income tax - not a capital gain. SImilarly, buying a plot of land to build 3 small houses on it is similarly a trading income. I had assumed it was all just CGT, so have not informed the revenue within 3 months etc.
I will need to consider transfer to ltd co in greater detail.
JOhn
I will need to consider transfer to ltd co in greater detail.
JOhn
Buying a single property to do up and sell on as a one off venture would probably still fall into a CGT classification. If this was the only transaction carried out of this nature then CGT might still apply.
The Revenue defines "trading" as "carrying on a transaction or a series of transactions with a view to making a profit".
In your circumstances, the fact that the land was purchased and then a number of buildings were constructed on it for future sale seems to indicate that it will result in a series of separate sales, rather than a one off sale and therefore is more in the nature of a trading set-up rather than a one off Capital Gains type transaction..
Having said that, there are circumstances where selling of an "asset" piecemeal (like an art collection) would still fall under Capital Gains regulations rather than "trade" regulations.
The distinctions between the two categories are not that clear cut.
The Revenue defines "trading" as "carrying on a transaction or a series of transactions with a view to making a profit".
In your circumstances, the fact that the land was purchased and then a number of buildings were constructed on it for future sale seems to indicate that it will result in a series of separate sales, rather than a one off sale and therefore is more in the nature of a trading set-up rather than a one off Capital Gains type transaction..
Having said that, there are circumstances where selling of an "asset" piecemeal (like an art collection) would still fall under Capital Gains regulations rather than "trade" regulations.
The distinctions between the two categories are not that clear cut.
Edited by Eric Mc on Friday 27th April 10:52
srebbe64 said:
I can highly recommend these guys, they're about to save me a lot:
www.premier-strategies.com/flash/
www.premier-strategies.com/flash/
Cheers Steve
Just spoke with Matthew from premier strategies. Not sure if I'm in the same league as some of the high nett worth people, but if I sell the properties I am building in one tax year, I'll need them (or someone else) to do something clever - or Gordon gets 40%.
johnfm said:
srebbe64 said:
I can highly recommend these guys, they're about to save me a lot:
www.premier-strategies.com/flash/
www.premier-strategies.com/flash/
Cheers Steve
Just spoke with Matthew from premier strategies. Not sure if I'm in the same league as some of the high nett worth people, but if I sell the properties I am building in one tax year, I'll need them (or someone else) to do something clever - or Gordon gets 40%.
You're welcome. They can also find ways of saving Stamp Duty as well.
johnfm said:
They sound like clever chaps who engage top flight tax QCs!!
Indeed they are. They will tell you that a couple of years ago Gordon Brown (prior to a budget) called in the top brass at the top half dozen accountancy firms. He told them that if they persist in heavily marketing Tax savings schemes then the Government would review their own accountancy requirments (which featured them). In effect, he threatened to drop them as suppliers. This, in turn, had the desired effect. Now that's the urban legend, but it might well be true because the big accountancy firms are definitely not too overt in their promotion of Tax saving schemes. This means that smaller (specialist) companies are beginning to fill this void.
srebbe64 said:
johnfm said:
They sound like clever chaps who engage top flight tax QCs!!
Indeed they are. They will tell you that a couple of years ago Gordon Brown (prior to a budget) called in the top brass at the top half dozen accountancy firms. He told them that if they persist in heavily marketing Tax savings schemes then the Government would review their own accountancy requirments (which featured them). In effect, he threatened to drop them as suppliers. This, in turn, had the desired effect. Now that's the urban legend, but it might well be true because the big accountancy firms are definitely not too overt in their promotion of Tax saving schemes. This means that smaller (specialist) companies are beginning to fill this void.
I expect the 'smaller' companies are owned by the bigger companies anyway!!
Either way, if they can help reduce my contribution to Gordon's 'waste my my' fund, I'll be happy.
Gassing Station | Business | Top of Page | What's New | My Stuff