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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4983
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Is it better individuals to purchase land, sell it and pay

Resolved Question:

Is it better for 9 individuals to purchase land, sell it and pay capital gains gain the first £11,100 free and then pay capital gains tax at either 10% or 20% depending upon the individual's income or put it into a Deed of Trust with the land being purchased by 2 individuals?
Many thanks for your advice and help,
Mandy
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your question..

If two individuals are paying for the land, then there are IHT implications as the amounts covering share of the other 7 would be deemed a potentially exempt transfer and seven year rule would apply (assuming two are paying on behalf of 9 individuals).

More information on gifts and IHT implications can be found here

http://www.which.co.uk/money/tax/guides/inheritance-tax-explained/inheritance-tax-planning-and-tax-free-gifts/

As beneficial owners of the land, all 9 would be able to utilise gains allowance of £11,100 each to cover gain on sale of land and pay CGT at the rate of 10%, 20% or a combination of both depending on individual's taxable income in the year of sale.

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.

Customer: replied 1 year ago.
Thank you very much for that advice. Would you be kind enough to let me know how much tax would be paid via a Deed of Trust. Very many thanks, Mandy
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply.

Lets say 2 individuals pay for land costing £90,000. they have effectively gifted (7/9x90) £70,000.

Provided they survive for 7 years from the date of making the gifts, the gift itself is out of scope of IHT.

Now we come to CGT -

The plot of land is sold for say £225,000 giving rise to a capital gain of £135,000 equivalent to £15,000 per owner.

Assuming all are basic rate taxpayers, then CGT payable would be (15,000-11,100) £3,900 x 10% = £390 per owner

in total (390 x 9) £3,510

I hope this is helpful and answers your question.

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