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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4995
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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, I have a properties that I have developed and added value

Resolved Question:

HI, I have a properties that I have developed and added value to. I want to sell this property and with all the profits made (No income taken) I intend to buy a further property to develop. What is the best way to avoid paying tax through the transfer of asset from property to money to property ? Setting up a company? I want to continue this process to build up asset value.
Many thanks
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.

Hello and welcome to the site. Thank you for your question.

Please clarify for me...
Have you bought a property, renovated it and then wish to sell it or
is your intention to make it available for let and then in due course sell it

Did you live in this property at any time?

The reason why I ask this is because of different tax implications.

Many thanks

Customer: replied 2 years ago.

Hi I used to live in the property. I bought it in 2004. I lived in it from 2004 to 2013

Its currently tenanted.

I have sought and gained planning permission to build a property to the side of it. I intend to build this property then sell both of them. With the profits I intend to buy a further property to let while repeating the development process through gaining planning permission to build another dwelling.

Expert:  taxadvisor.uk replied 2 years ago.

Thank you for your prompt reply.

As far as the property you have lived from 2004-2013 is concerned, the gain you make from selling it would most likely be covered by principal private residence relief and letting relief. This would hopefully result in no CGT payable.

If it is your intention to build a property to the side of it and then sell it without considering for letting purpose, HMRC would view you as a property developer and not a property investor.

As property developer, your profit from sale of this second property would be treated as trading profit for income tax purposes and subject to income tax and Class 4 NI.

On the other hand, if you were to consider this activity through a LTD company, then the company's profits would be chrageable to CT at 20% as opposed to income tax at marginal rate of 20% and 40%.

If your activity is deemed that of property investor (i.e. buy a property, do it up, rent it for a while and then sell it) the gain would be chargeable toCGT.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

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