CGT minimisation on sale of property - willing to pay advice fee!

[propertyguy]

Hi

I am in the process of refurbsishing a property that I have owned for 10 years. My plan is to sell the property. I have never lived at the property and I am also in the process of transferring the property from my sole ownership to joint ownership with my wife - I am planning to do this on my own by completing the necessary land registry documents. Taking into account the purchase price, likely sale value and refurbishment costs by my calculation the taxable gain will be in the region of £50,000 after deducting 2 x £11100 CGT tax free allowance for myself and the wife. I am therefore going to pay 18% x £50000 = £9000 in CGT tax, maybe slightly more if some of my share of the gain goes into the 28% tax band.

Does anyone know of any lawful ways I can reduce this tax bill? I am happy to pay for the advice as long as the fee is reasonable compared to the tax I will pay .

Thanks in advance.

It's just painful writing out a £9k cheque to HMRC.

[maths]

What was your intention with respect to the property at the time of purchase?

Has the property been let out?

[SteLacca]

You need to be careful, HMRC may try to prove that it is a trade taxable as income, rather than a capital gain, meaning that you would pay tax at your marginal rate. See here, http://www.accountingweb.co.uk/tax/pers ... y-guidance

[propertyguy]

What was your intention with respect to the property at the time of purchase?

Has the property been let out?

When I purchased the property my intention was to let it out for the long term and never live in it. The property has bee let out since purchase. thanks.

[propertyguy]

You need to be careful, HMRC may try to prove that it is a trade taxable as income, rather than a capital gain, meaning that you would pay tax at your marginal rate. See here, http://www.accountingweb.co.uk/tax/pers ... y-guidance

That would be bad, very bad. My intention from outset was that this property was an investment to be sold at a later date. I can't understand why it could be thought of as a 'trade'. Maybe if the income from the investment was my sole income.

[bd6759]

You need to be careful, HMRC may try to prove that it is a trade taxable as income, rather than a capital gain, meaning that you would pay tax at your marginal rate. See here, http://www.accountingweb.co.uk/tax/pers ... y-guidance

He has owned the house for 10 years!!. It is clearly not a trading activity.

[maths]

Whilst it seems clear that the original purchase was of an investment property it could in view of the current proposal/plan result in the activity being treated as a trade and hence any profit falling subject to income tax not CGT.

Effectively, the property would be treated by HMRC as having been appropriated to trading stock precipitating a capital gain at that point on any gain and thereafter any gain subject to income tax.

[propertyguy]

i have been having a think about my options on this propery disposal. There is another detail to my situation which I may be able to use to my advantage. My current own residence where i live is rented I dont own it. Also note I have one other buy to let property that I have rented for 10 years in addition to the buy to let property I am currently renovating and selling. It has occurred to me that I could actually move into the property that I am intending to sell and nominate it as my principle private residence. I am not sure the minimum time period I would need to move into the property for in order to reduce the taxation on sale. In addition the buy to let property I am selling is around 50km from where I currently live. I am aware I would have to change my bank statements ,documents, electoral register to the new property address. I cant honestly say I would be prepared to settle my children in a new area 50km away just to avoid CGT tax!

[bd6759]

That wouldn't work. The term "residence" implies a degree of permanence. Moving in when you have the intention to sell would not meet that criteria.