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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I have purchased a flat off plan 10 months ago. The building

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I have purchased a flat off plan 10 months ago. The building will not be finished for a further 8 months. I paid 10% of the purchase price. If I re assign the contract to another buyer for say, £10,000 more than I paid, then leave the profit plus original deposit with my solicitor, then use the funds to purchase another flat off plan and do exactly the same thing multiple times, when is my profit deemed as being crystallised?
Can you suggest a better way of structuring the purchasing more tax efficiently?
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Your profit will be crystalised on the last transaction before the end of the tax year and successive profits aggregated and exposed at best to Capital Gains Tax (CGT). However, HMRC will almost certainly classify this activity as trading in land in which case the profits will be treated as income and charged under the Income Tax regime which you will find a rather more expensive option. I am so sorry to have to rain on your parade. Tax efficiencies might be made by selling in successive years to spread the income over several tax years..
Customer: replied 2 years ago.

Hi, thanks for your reply.

Are you sure that HMRC would treat this as land trading, as it seems to me that I am trading an option to buy the property? Also, is my solicitor under a duty of care to report such activity to HMRC?

I am pretty sure that HMRC will regard such activity as trading and tax accordingly. Your solicitor has no alternative. All transactions in land are reported to the Valuation Office Agency (VAO), part of HMRC staffed by Chartered Surveyors, who monitor all land prices. Their main function is to set Council Tax bands and business rating values.
Customer: replied 2 years ago.

Ok, understood. Is this a transaction in land however, because the purchase is never completed, I have only exchanged contracts. I thought that only once a property purchase is completed, that the deal is reported to the valuation office.

Well that would appear to be correct, but your local tax office could well consult with the VOA as the the market value of your transaction.
Customer: replied 2 years ago.

Could you clarify that please?

You local tax office might on investigation not accept the prices paid for your options and could call for assistance from the VOA imposing instead current market values.
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