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Should HPI be taxed as Capital Gains
Comments
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Nothing stopping them transferring for no monetary value, no stamp duty. If there is a monetary exchange then it is going to be an issue with accruing stamp duty, although there are many established methods to avoid this. For resetting the value then monetary value is probably necessary. Foreigners will still escape this tax as they don't pay CGT.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.
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.):)0 -
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.
ok partly fair enough but when used the word "labour mobility" but i really just meant "people mobility".
CGT has potentially a loads bigger impact than stamp duty because the rates are so high & because it'd be so widely applicable... the highest stamp duty band is 7%, and only people who are really wealthy [£2m+ houses] pay that.
imagine that all residential house sales attracted CGT of 18%... according to Fergus Wilson, 'house prices double every seven years'... so in just 7 years you're talking about half a house being taxable, i.e. losing 9% of your house in the first seven years only, even for a cheap house.
taking a more sober example & saying that house prices double every 15 years, say someone who bought a family house at 30 & wanted to downsize at 60, well, if originally bought for £100k that house will be worth £400k 30 years on, so £300k will attract tax of [w/ no taper relief etc] 18%, so that's tax of £54k, you've lost an eighth of your house...FACT.0 -
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.
no not between spouse
if you are thinking of shares then it sort of works because you are not really buying the 'same' product but doesn't work for property, antiques, land or specific items0 -
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.
yes indeed it is possible that selling fewer at a higher price might give a greater profit than selling more at a lower price
however this requires a cartel to control the level of sales, as if only a few restrict their sales to maintain prices, the others can then sell into the market and benefit from high prices and high level of sales.
as there are many hundreds of building companies it is unlikely that such a cartel would be successful.
the building industry has few barriers to entry as building skills are widely available.
of course the planning rules restrict the amount of available building land which is why we need to reform the planning framework to provide additional land0 -
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?
Because generally speaking it is tax inefficient to hold a BTL in a company with the tax system as it currently stands. Rental income received as an individual doesn't attract NI so you just have to pay income tax on the profits. If you put it in a company any salary you draw attracts NI and any dividends are paid after corporation tax and then you have to pay income tax again. There is no avoidance of NI (c.f. Income received from employment and paid out of a company as dividends) so you end up paying more tax.0 -
yes indeed it is possible that selling fewer at a higher price might give a greater profit than selling more at a lower price
however this requires a cartel to control the level of sales, as if only a few restrict their sales to maintain prices, the others can then sell into the market and benefit from high prices and high level of sales.
as there are many hundreds of building companies it is unlikely that such a cartel would be successful.
the building industry has few barriers to entry as building skills are widely available.
of course the planning rules restrict the amount of available building land which is why we need to reform the planning framework to provide additional land
If any one of the major house builders publicised that as their strategy to the city then every investor would run a mile.
It is the house builders that control the prices of new houses. Nothing anyone can do about that. How many developments were simply put on ice as soon as there was any indication of economic uncertainty in 2007/8? (most of them, uk-wide).
'Build more homes' isn't really an option. They will build just as many as they can sell for the maximum return and not a single one more.0 -
Blacklight wrote: »If any one of the major house builders publicised that as their strategy to the city then every investor would run a mile.
It is the house builders that control the prices of new houses. Nothing anyone can do about that. How many developments were simply put on ice as soon as there was any indication of economic uncertainty in 2007/8? (most of them, uk-wide).
'Build more homes' isn't really an option. They will build just as many as they can sell for the maximum return and not a single one more.
The downturn in the market after 2008 was due to the lack of buyers due to mortgage shortage and high deposit requirements
Check the accounts of the major house builders and see their sales collapsed, they started making a loss and the dividends to shareholder dropped to zero.
There are literally hundreds of builders in the UK.
There is nothing stopping people like you getting together with your mates and starting build a few house :
If you are right then you will very quickly make a fortune as will all the small builders.
Of course these small builders would soon grown size and the big boys would lose market share as their prices discourage sales.0 -
chewmylegoff wrote: »Because generally speaking it is tax inefficient to hold a BTL in a company with the tax system as it currently stands. Rental income received as an individual doesn't attract NI so you just have to pay income tax on the profits. If you put it in a company any salary you draw attracts NI and any dividends are paid after corporation tax and then you have to pay income tax again. There is no avoidance of NI (c.f. Income received from employment and paid out of a company as dividends) so you end up paying more tax.
Unless you loan the money to yourself from the company. One of the footballer favourite tax avoidance methods.0 -
Unless you loan the money to yourself from the company. One of the footballer favourite tax avoidance methods.
"There is nothing to stop your company lending you money," he says, but you are taxed as if it were an employee benefit. HMRC assumes you would have paid 4% interest on the loan if you had borrowed it on the open market. If you are a 50% taxpayer, that means you have to pay a 2% tax charge, but every year. What's more, the company making the loan has to pay 25% of the amount of the loan to HMRC, which is repaid when the loan is repaid by the individual. "
http://www.theguardian.com/money/2012/jun/22/tax-avoidance-loophole
Can be worthwhile if you're on 30k a week and want to buy a big house. But not worth the fees if you're only on £30 a year and just want to get by.:)0 -
If CGT were brought in for sales of primary residences, I'd probably never sell a house again- just rent it out and either buy or rent a home in the area I needed to move to.0
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