CGT EXEMPT OR UK TRADING

[vorabj]

M is non-resident, not ordinarily resident and not domiciled in the country.

He bought land in UK some 10-12 years ago with a view to redevelop it and possible either occupy it for own purpose or let it (originally a shop/offices premises which was burnt down and belonging to someone).

Commenced development in Yr.2003 - Building works completed in Yr.2005.
Yr.2006 put the property for letting but no tenants to date - though there were few near misses.

Thus lying unoccupied until sold yesterday 4.11.2008. Completion Certificate from the Borough Council not yet obtained. Sale is subject to certificate being obtained which is not a problem as all outstanding works are now complete following the first application of the certificate.

Q. Is this still an investment property, such that the resulting gain will be exempt because of M's status

OR

Q. Will it be construed as business - being development and sale - hence trading in the UK and taxable at Income Tax rates.

Not having a certificate - does this mean property is not complete and therefore could not be available for letting - hence not an investment any longer but a trading asset.

I understand Completion certificate only confirms work is done according to Building Regulations - It does not preclude occupation and hence it was available for letting from Yr.2006 and hence a sale of investment property.

WITH REGARD TO VAT -
AS SALE OF NEW PROPERTY WITHIN 3 YEARS IS VATABLE - CAN HE CLAIM INPUT VAT

THANKIG YOU.

[Peter D]

Sound like UK IT to me and may be further tax in his country of residence after using UK tax credits. Did he buy the property whilst he was resident here or another country. Intent is important but you stated to occupy or let so a bit whooly unless he raised a loan to purchase the land and the reason for the loan was well defined. Regards Peter

[vorabj]

Thank you Peter,

Intention to retain and let has been there throughout - even has proof as he had appointed two estate agent for letting and nearly had a tenant for letting with drat lease drawn up, so he can substantiate the intention to let.
- because it could not be let and being empty for nearly 3 years - he decided to sell.

Acquisition of land was whilst he was not in the UK - has always been non resident; not ordinarily resident and non domiciled. Always lived in Singapore - visits uk infrequently on average for 2/3 weeks a year - by the way he has a UK residence in his name but occupied by his uncle since aquisition in 1995.

Finance for purchase of land and subsequent development was from his own sources.

[JSK TAXATION]

vorabj

Prima facie there appears to be a combination of trading and investment here since it appears the owners intention changed after the property was built. At this point, HMRC could argue that there was an appropriation from stock to fixed assets i.e. a deemed disposal for trading purposes taking place at MV. The base cost for CGT would then be the MV and this would be the value used when the property is ultimately sold.

Being non resident, I am wondering who carried out the development and under whose instructions. Did the owner appoint an agent in the UK to oversee the development etc since HMRC would have to prove there was a permanent establishment in the UK to succeed in demonstrating there was a UK trade in any case.

If you would like Me to handle this situation for you then please let me know. Kind regards,

[vorabj]

Thank you, John

The owner has his own advisers in Singapore, who I believe will consult their representative here. However they have a link to this post in case they wish to consult you.

kind regards.