minimising CGT on property sales

minimising CGT on property sales

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Discussion

johnfm

Original Poster:

13,668 posts

252 months

Monday 26th March 2007
quotequote all
Hello all

Building 3 little cottages. May result in circa £100k 'profit' on resale. Plot was bought in Nov 2004 in wife & my name.

Do not want to cough up 40% CGT.

Are there any clever, lawful methods of reducing the burden??

What about clever, not-quite-lawful ways???

Obviously, simplest way is not to sell them - merely let them out and refinance.

Eric Mc

122,324 posts

267 months

Monday 26th March 2007
quotequote all
Do you intend to buy and sell any more properties after this venture is completed?

You have to be careful that you are not running a property development "business". If you are, trading tax rules apply rather than Capital Gains Tax rules (and you would straight away lose the (from 6 April 2007) £9,200 Capital Gains Tax personal Allowances available to you both.

FUBAR

17,062 posts

240 months

Thursday 29th March 2007
quotequote all
Eric Mc said:
Do you intend to buy and sell any more properties after this venture is completed?

You have to be careful that you are not running a property development "business". If you are, trading tax rules apply rather than Capital Gains Tax rules (and you would straight away lose the (from 6 April 2007) £9,200 Capital Gains Tax personal Allowances available to you both.


Arent shareholders and/or Directors of such a business allowed to withdraw profits at only 10% tax? Not my direct area I have to admit.

Eric Mc

122,324 posts

267 months

Thursday 29th March 2007
quotequote all
No.

First of all, if the business was purely a sole-tradership or partnership, the taxes are worked out on the profits generated by the business - irrespective of what the owner(s) of the business darws out for himself/themselves.

If the business is a limited company, the company pays Corporation tax on its trading profits, AFTER deducting salaries (including directors' salaries) but BEFORE payment of dividends.
Of course, the directors' salaries would be subject to normal PAYE and NIC charges.

FUBAR

17,062 posts

240 months

Thursday 29th March 2007
quotequote all
Ahh, apparantly Im getting confused with selling the shares in such a company....I think confused

Eric Mc

122,324 posts

267 months

Thursday 29th March 2007
quotequote all
If you sell shares in a "trading" company, the disposal is deemed to the disposal of a business asset and consequently will benefit from higher rates of Taper Relief for Capital Gains Tax purposes.

However, there are tons of privisos and pitfalls to watch out for as the Revenue can challenge whether the sale of company shares is actually a sale of a business asset.