Should HPI be taxed as Capital Gains

AndyGuil

MFW_ASAP wrote: »

If it so easy to set up a limited company, then why don't most BTL landlords do it now?

Aside from that, would people really go to the hassle of setting up a company, getting an accountant, doing tax returns, just to save paying tax on gains that would not be there anyway because taxation has put the breaks on runaway HPI?

If you could 'bed and breakfast' in this way, then why don't BTL landlords do it already to avoid capital gains tax? What happens if you move the property to your partner and they split up with you?

There are many risks. I'm sure people already do it as they already do with other investments. Many people move into the property to avoid the tax by flipping it into their main home. Clearly this is the easiest route for a BTL to avoid the tax which reduces the need to pursue other routes.

MFW_ASAP

AndyGuil wrote: »

There are many risks. I'm sure people already do it as they already do with other investments. Many people move into the property to avoid the tax by flipping it into their main home. Clearly this is the easiest route for a BTL to avoid the tax which reduces the need to pursue other routes.

I'm sure that if someone had several BTLs in their portfolio, then it's worth having them under a limited company structure. If someone has just one or two BTLs then it's probably not worth the cost of setting up a BTL. Similarly if someone just had their home, then it wouldn't be worth putting it into a limited company.

A loophole that would close if all properties were subject to CGT.

the_flying_pig

for sure i'd crack down on BTL capital gains tax. it should only ever be possible to declare a house as your main residence at the time you buy it, and only then if you don't own any other houses, i.e. giving every household a 'CGT allowance' of one house.

but i don't really like CGT on the residence of ordinary owner-occupiers. sounds like an awful barrier to labour mobility.

princeofpounds

but i don't really like CGT on the residence of ordinary owner-occupiers. sounds like an awful barrier to labour mobility.

Stamp duty is bad enough for labour mobility.

MFW_ASAP

the_flying_pig wrote: »

but i don't really like CGT on the residence of ordinary owner-occupiers. sounds like an awful barrier to labour mobility.

I don't understand this argument, to be honest. The only example given was someone who owned a house for 20 year and then moved because of a job. I would hazard a guess that if anyone lived in the same house for 20 years (about half their working life), there would be greater barriers to them moving home for a job than just a bit of tax.

As princeofpounds has said, stamp duty is more of a barrier because this has to be paid for each property bought. With CGT, you only have to pay if you have made a profit over £10k (£20k if owned jointly). If you move around a lot with several jobs you might not have much (if any) CGT to pay, but you could have a significant amount of stamp duty to pay.

If anything, replacing stamp duty with CGT would help, not hinder, labour mobility.

CLAPTON

MFW_ASAP wrote: »

Yes, amazingly enough they held onto their land during the downturn and only started to build when house prices started to go up.

yes; so you agree the more they sell the bigger the profits?

and maybe people would say that during 2008 -2010/11 the reason for low sales was lack of mortgages

CLAPTON

AndyGuil wrote: »

I'm not familiar with BTL tax rules. If we are looking at those then they are exempt for living in the property.

Another way around the tax would be like in shares to bed and breakfast with the spouse every year.

under current cgt rules b&b with a spouse is ineffective as there is no tax between spouses but equally the base price isn't re-set either

MFW_ASAP

CLAPTON wrote: »

yes; so you agree the more they sell the bigger the profits?

and maybe people would say that during 2008 -2010/11 the reason for low sales was lack of mortgages

No, the more they sell at a higher price, the greater their profits. It's simple mathematics. I could build and sell 1000 homes with a £1 profit per home but I wouldn't make as much profit than if I build and sell 500 homes with a £10 profit per home.

antrobus

AndyGuil wrote: »

..... Just move from one person hold for the required time then move back. ....

That would depend on what the legislation specified was the "required time" given that there might be anti-avoidance clauses relating to transactions with connected persons.

AndyGuil wrote: »

..... Then the purchase price of the property is effectively reset and gains aborbed by the CGT allowance of both persons.

At the cost of incurring SDLT and LR fees every time you changed ownership. If you had a £250k property, I'm not sure it would be worthwhile paying £7,500 just to 'bank' a potential £10,000 tax free gain.

(On second thoughts, it's probably not worth bothering with any anti-avoidance rules.):)

AndyGuil

CLAPTON wrote: »

under current cgt rules b&b with a spouse is ineffective as there is no tax between spouses but equally the base price isn't re-set either

It is effective for other investments when the spouse holds the asset for at least 30 days. This should be effective. It leads to resetting of the value too.