2nd Property Purchase, renovation and resale; tax implications?

Smokeysimon

I wondered if anyone could give some guidance and real-world experience in purchasing a second property, renovating it and then selling back on?

I will be seeking professional guidance next week however, I am keen to start my research so thought I would pose the question in case someone has done very similar. 

It seems I would be liable for Capital Gains however, looking at some older threads some people mentioned being classed as “trading”? I cannot see how this could relate as this is very much a one-off for me and I will continue working in my normal job and carrying on living in my home. 

I do however appreciate this will be classed as my second home (so I will have to accept stamp duty).

I am obviously keen to be as tax efficient as possible and will be renovating the property with another couple, so at the moment my thoughts are to continue purchasing the property between us all and simply use our tax thresholds so profit will be taxed at 18% below total income below £50k for each person – then residual profit to be taxed at 28% (minis any allowable deductions).

If anyone has any experience in this area and could offer advice/guidance then I would be very grateful as never done this before and want to ensure I at least have some idea before going into a meeting with someone charging £200 per hour!

BRIEF OVERVIEW
Property; 3 Bedroom Flat – purchase price to be finalised, but under £200k.
Plan is to purchase, renovate and sell for Circa £350k (timescale 6-9 months)

martindow

How much are you proposing to spend to increase the value by £150k to almost double its value?  Are you sure that your buying and selling estimates are accurate?

Smokeysimon

One of the other couple is a retired builder and estimates the refurbishment at £50k. We are therefore fairly confident on the buying/selling estimates.

It is one of the reasons that I am interested as I am not involved in buying/selling property. He on the other hand is and I would be much more the silent partner with mostly financial involvement.  

hazyjo

It would be very unusual for a flat to be priced £150k under what it's worth just because it needs a refurb (at the price level you're looking at). Is this an auction property? Are you SURE there's not another problem like a very short lease or structural problems? Basically, you're the one who stands to lose out then if you're putting the money in. I'd tread very carefully in your shoes...

sheramber

if you are buying  ot  with the intention of selling then HMRC  will treat it as a trade.

_Penny_Dreadful

Smokeysimon said:

I wondered if anyone could give some guidance and real-world experience in purchasing a second property, renovating it and then selling back on?

I will be seeking professional guidance next week however, I am keen to start my research so thought I would pose the question in case someone has done very similar. 

It seems I would be liable for Capital Gains however, looking at some older threads some people mentioned being classed as “trading”? I cannot see how this could relate as this is very much a one-off for me and I will continue working in my normal job and carrying on living in my home. 

I do however appreciate this will be classed as my second home (so I will have to accept stamp duty).

I am obviously keen to be as tax efficient as possible and will be renovating the property with another couple, so at the moment my thoughts are to continue purchasing the property between us all and simply use our tax thresholds so profit will be taxed at 18% below total income below £50k for each person – then residual profit to be taxed at 28% (minis any allowable deductions).

If anyone has any experience in this area and could offer advice/guidance then I would be very grateful as never done this before and want to ensure I at least have some idea before going into a meeting with someone charging £200 per hour!

BRIEF OVERVIEW
Property; 3 Bedroom Flat – purchase price to be finalised, but under £200k.
Plan is to purchase, renovate and sell for Circa £350k (timescale 6-9 months)

What you are proposing would be subject to income tax not capital gains tax. 

I don’t see how your figures stack up. You increase the value of a property by increasing its size, which you can’t do with a flat, or making the unmortgageable mortgageable.