capital gains tax

firbyfred

If we renovate a property are we liable for capital gains tax if we sell when the project is completed.

silvercar

If it is your principal private residence its exempt from CGT. Otherwise there would be a liability.

You do get an allowance of £8,800 each.

david29dpo

you can have up to four names on the deeds. think about it!

silvercar

you can have up to four names on the deeds. think about it!

Be very careful. You are trying to save tax not throw three quarters of your property away!

LOST

you can offset any gains for tax by any improvement costs/costs of developing and any fees,

therefore the total amount of gain that would be liable for CGT would be the sale proceeds minus the acquisition costs (including improvement costs) after using your annual exemption of £8,800.

cash99

firbyfred wrote:

If we renovate a property are we liable for capital gains tax if we sell when the project is completed.

If the property is bought with the sole intention of renovating it and selling at a profit, it is likley to be considered "an adventure in the nature of trade", consequently income tax and not capital gains tax will be due.

If you are about to embark on this business venture, then some professional tax advice is essential.

Petmidget

You dont make clear, is this YOUR home or an investment.

YOUR home, dont worry no implications.

An investment, the answer is yes to CGT on the profit less any reliefs principally Annual Exemption unless it take you ages. If you make 10K or more clear profit, ask an accountant to do a calc for you.

As to "an adventure in the nature of trade". Unlikely on your first deal, but if you get the bug it will become an issue. And if 6 years down the line IR see 4 similar renovations, they can investigate whether it is a trade and subject to Income Tax rather than CGT (which will cost you). But if that happens, you get an accountant to defend you

cash99

Petmidget wrote:

As to "an adventure in the nature of trade". Unlikely on your first deal, but if you get the bug it will become an issue. And if 6 years down the line IR see 4 similar renovations, they can investigate whether it is a trade and subject to Income Tax rather than CGT (which will cost you). But if that happens, you get an accountant to defend you

Petmidget are you basing this on pracitcal experience. I'm sure you know one off transactions can be classed as trading.

Also just noted specific anti-avoidance legislation relating to transactions in land.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM60310.htm

This refers to the ICTA 1998 ( old income taxes act) but the clauses also appear in ITTOAI 2005 ( new income taxes act).

Petmidget

Yes I am aware that a single transaction can be held as trading, and yes I am basing my reply on practical experience.

While the HMRC manual (oh joy the day they made it public property) is useful for reference, it must be understood that it is THEIR point of view. Not that necessarily held up by law or in general usage.

"Just coz they say so dont mean it is so"

That is what case law and professional advice is for.

cash99

Case law and experience may get around the trading aspect, but what about the anti avoidance provisions for transactions in land. Are you saying that HMRC do not invoke these, is there no requirement to self assess.

I appreciate that the HMRC manuals are not law, but in this case the wording is very close to the actual legislation, so there does not seem to be much of a grey area.