property development

Discussion in 'General Business Forum' started by matt90bc, Apr 7, 2015.

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  1. matt90bc

    matt90bc UKBF Newcomer

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    Does anyone know if you would have to pay tax on any profit made from buying a house to renovate and then sale if it was on a residential mortgage?
     
    Posted: Apr 7, 2015 By: matt90bc Member since: Oct 8, 2014
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  2. matt90bc

    matt90bc UKBF Newcomer

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    And also if you think there is still money to be made renovating houses and selling on,not renting out.
     
    Posted: Apr 7, 2015 By: matt90bc Member since: Oct 8, 2014
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  3. JTQ1975

    JTQ1975 UKBF Newcomer

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    In short, yes and yes.

    'Buy to sell' properties are subject to tax at the 'property trader' rate.

    There is still money be made in development. My view is that property investment / trading can be far less risky than other businesses such as cafes, bars and restaurants which have a very high failure rate.
     
    Posted: Apr 7, 2015 By: JTQ1975 Member since: Dec 23, 2011
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  4. matt90bc

    matt90bc UKBF Newcomer

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    even on a residential mortgage? so it was my only place of dwelling and it gained value in the time I had it.
     
    Posted: Apr 7, 2015 By: matt90bc Member since: Oct 8, 2014
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  5. JTQ1975

    JTQ1975 UKBF Newcomer

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    If it was your dwelling [ie your home] then it wouldn't be a "buy to sell" [ie a property that you buy principally to sell quickly for the sole purpose of making a profit] and therefore you wouldn't be liable for tax when you do eventually come to sell.

    Someone may be able to confirm this but my understanding is that when you sell [it's been a while since I've sold] you may have to declare that the proceeds are exempt from tax in order to avoid paying it].

    My guess is that the answer to your next question is '1 year'.
     
    Last edited: Apr 7, 2015
    Posted: Apr 7, 2015 By: JTQ1975 Member since: Dec 23, 2011
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  6. matt90bc

    matt90bc UKBF Newcomer

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    haha you guessed right! I'm nowhere near a position to buy myself but thought I may be able to get some friends on board with the idea,a year seems a long time to wait when I could have done a house up in 3 months,thanks for the help anyway!
     
    Posted: Apr 7, 2015 By: matt90bc Member since: Oct 8, 2014
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  7. David Griffiths

    David Griffiths Verified Business ✔️
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    It doesn't matter if it's your main home if you bought it with the objective of doing it up and selling it. The capital gains exemption for selling your "principal private residence" is specifically denied in such cases
     
    Posted: Apr 7, 2015 By: David Griffiths Member since: Jun 21, 2008
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  8. JTQ1975

    JTQ1975 UKBF Newcomer

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    Agreed. It all comes down to intention.

    If your intention is to buy, do up and sell in order to make profit then tax would be applicable.

    My understanding is that there has historically been an approximate minimum threshold; a point at which HMRC will often accept that a property has been bought as a PPR and sold on for a genuine reason [perhaps due to unforeseen circumstances]. My understanding is that a common minimum threshold at which HMRC have often not challenged is around the 1-year mark.

    Having said that as you rightly point out, it's all down to intention. Evading tax [or attempting to evade tax] by lying about your intention [and what can be a relatively obvious motive for sale] is a criminal offence and punishable by a prison sentence, not to mention potential confiscation of profits [due to proceeds of crime act].

    I'm sure there are enough legit ways to save save tax with the help of a good accountant [especially if you're a start up].
     
    Last edited: Apr 8, 2015
    Posted: Apr 8, 2015 By: JTQ1975 Member since: Dec 23, 2011
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  9. Bob

    Bob Contributor

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    Does the hypothetical individual have short term or long term funding in place? Short term implies trading. Loads of case law available
     
    Posted: Apr 8, 2015 By: Bob Member since: Jul 24, 2009
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  10. JTQ1975

    JTQ1975 UKBF Newcomer

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    I imagine that short term funding [e.g. a bridge] may be a red flat as to a trading intention. Long term finance [e.g. a mortgage] is obviously not proof one way or another of intention. But it all boils down to intention.

    I've seen the same question as the OP's crop up several times on various forums and I suspect where the question comes from is not about where tax is applicable but more about how to evade paying tax when it is genuinely due.

    I do always find it funny though when I meet people who's parents were developers. They always seem to have one thing in common when growing up; how they regularly moved house!
     
    Posted: Apr 8, 2015 By: JTQ1975 Member since: Dec 23, 2011
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