Property development

[Lisa R]

I am going to buy a house with my partner and mother. This will be mine and my partners only residence, but my mother has her own property.

Myself and my partner will live in the property for 6 to 12 months while we convert it into 3 flats. The flats will then be sold.

What will the tax implications be? Are we able to claim one of the flats as our main residence even though my mother has another property? Would we have to pay CGT on the other two flats at 40% after deductions? Would it be more beneficial to buy the property as a Ltd company and pay corporation tax on all 3 flats?

[UKTAXSAVER]

I forsee many problems here. Do take care.

1. When your mother enters into the contract she then has, I believe, interests in more than one propery so could experience difficulties when claiming any CGT exemptions on eventual sales.

2. It is clear your prime objective is to make a profit from the conversion.

3. There is an explicit rule that says you can only take advantage of CGT "own home" exemptions if you didn't buy the property with the motive of making a profit on it but rather to occupy it as your home.

4. If you buy the property in a limited company you could have many difficulties when extracting money. The whole exercise could result in profits being taxed twice if you're not careful.

This is a complex issue and I would recommend you get professional advice structured to your precise needs and plans. We can help, if you wish, on a professional basis. Just e-mail to let us know.

In the meantime I hope this has helped.

UKTAXSAVER
info@taxaccount.co.uk