craig_007
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| posted on 26/9/12 at 10:34 PM |
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Anyone bought and sold house here for a living
I'm contemplating buying a run down house to revamp and sell on, I'm going into this with a mate of mine (workmate over the past few
years)
Were not going in blind, both with trades (Plumber & Joiner) so the revamp doesn't concern us, what doe's concern me though is the
capital gains tax and any other costs.
I'm just curious if anyone on here had done this and has any advice for me.
Thanks
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MRLuke
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| posted on 26/9/12 at 11:38 PM |
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Have you done anything similar? There are a lot of small things that add up to a large cost.
FYI I am a QS
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BangedupTiger
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| posted on 26/9/12 at 11:49 PM |
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How many properties are you planning on doing in a year?
How much profit are you expecting to make on each property?
Would it not make sense for one of you to move into the property as your home whilst the refurb is ongoing?
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samjc
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| posted on 27/9/12 at 12:17 AM |
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My morgage was cheaper doing it as a live in for 3 months then I could sell or could rent out, why sell in such a low market. Why not let out ?
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cliftyhanger
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| posted on 27/9/12 at 06:24 AM |
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I have a few places, but keep and rent out.
However, I understand there are 2 tax systems. One is where you buy as investment, and sell at a later date, which will mean capital gains tax.
The other is if you turn a lot around you pay income tax.
If you buy, "live" in it and sell, no tax due (obviously you can't write costs off against profits either, but as you are not paying
tax etc)
2 people =double the opportunity
Not sure on how long you have to own the place either. If you do it a lot, the taxman will get interested, but one every 2 years each should be fine.
You really need expert advice though.
Finally, my view is that old one. Buy the worst place in the best area. Spend £25k on a £100k house, make a bit of profit. Spend £25k on a similar
sized £250K house= a lot more profit.
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snapper
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| posted on 27/9/12 at 07:34 AM |
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Take out cost of buying the property, any interest on loans to buy it materials and your wages, any legal expenses, you taxed on net profit
If you rent the property for 5 years you only pay tax on the rent
But you should fully consult accountants and tax experts before you start.
I eat to survive
I drink to forget
I breath to pi55 my ex wife off (and now my ex partner)
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craig_007
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| posted on 27/9/12 at 08:07 AM |
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Thanks for the reply's.
I've never done a house personally (IE buy to sell). With my trade I've done lots of houses for various people throughout the years and
can turn my hand to most aspects of the building trade to an extent.
I've bought houses in the past to live so I'm aware of the legal fee's etc.
The plus side for me is, we don't require a mortgage, we have the purchase money and renovation money sitting.
So if were going to be doing say 6 of these a year we would really need to set up in business (speak to someone professional) but as stated were going
to be paying tax on profit only.
Mr Luke,
When you say there's lots of small things to add, do you have a few pointers just to see if I have allowed for these ?
Thanks
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russbost
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| posted on 27/9/12 at 08:57 AM |
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I've done this a no. of times.
First buy the property in yours your business partners & both respective wives names if applicable, I always buy property in my wifes name &
mine, you then get double the capital gains limit on sale (you could get 4x with 4 names), you'd need to talk to an accountant for accurate
figures, but you can perfectly legitimately & legally take over £20k as a capital gain between you & spouse (or business partner) without
paying a penny of tax.
Once you're over that limit I believe tax regime changed recently so talk to accountant
Yes, small things add up, & you will invariably find costs you'd not budgeted for, so essential there is a decent margin in the property b4
you start, difficult to make significant gains in the current market & you might be better to do one up, then get buy to let mortgage to get your
investment back & take rental income, use the mortgage money to buy the next one & so on, if you just sell one or 2 a year most of your
capital gain will be tax free. You can even sell the property to "yourself" as a ltd company which can have tax gains if you are talking
several properties - again you need to talk to a good accountant who deals with ltd companies & knows the loophioles - there are some really weird
tax rules affecting capital gains - more particularly on commercial properties, but still worth taking advice on residential
I no longer run Furore Products or Furore Cars Ltd, but would still highly recommend them for Acewell dashes, projector headlights, dominator
headlights, indicators, mirrors etc, best prices in the UK! Take a look at http://www.furoreproducts.co.uk/ or find more parts on Ebay, user names
furoreltd & furoreproducts, discounts available for LCB users.
Don't forget Stainless Steel Braided brake hoses, made to your exact requirements in any of around 16 colours.
http://shop.ebay.co.uk/furoreproducts/m.html?_dmd=1&_ipg=50&_sop=12&_rdc=1
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NOTE:This user is registered as a LocostBuilders trader and may offer commercial services to other users
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BangedupTiger
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| posted on 27/9/12 at 12:31 PM |
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As I asked earlier, how much profit are you expecting to make in a year?
This is the most important question to answer, depending on your answer then most of the replies in this thread may be incorrect.
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JonnyS
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| posted on 27/9/12 at 12:31 PM |
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Speaking as an accountant  you have to be clear what you are doing.
2 simple scenarios:
If you buy a property with a business partner with the intention of doing it up and renting it out, then you change your mind and sell it, you will
pay capital gains tax on the gain in the formula: half of sale price less half the cost to purchase and do it up less annual allowance of approx
£10K. The tax will be either 18% or 28% depending on your current annual income.
If you buy a property with a business partner with the intention of doing it up and selling it, then you are trading and should usually either be
registered as a partnership or buy it through a limited company.
Of course there is a grey area as to what your intention was, whether you've done it before etc etc. That risk is down to what you and your
business partner accept to take. If you are looking at multiple properties, then my advice would be to set yourself up as a business from the
start.
If you are looking at continual reinvestment of profits, a limited company is likely to be a better route to take. Although there are lots of other
factors to consider.
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JonnyS
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| posted on 27/9/12 at 12:36 PM |
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quote:
Originally posted by russbost
Yes, small things add up, & you will invariably find costs you'd not budgeted for, so essential there is a decent margin in the property b4
you start, difficult to make significant gains in the current market & you might be better to do one up, then get buy to let mortgage to get your
investment back & take rental income, use the mortgage money to buy the next one & so on, if you just sell one or 2 a year most of your
capital gain will be tax free.
I'm not saying you can't do that (and I don't know all the facts about your precise circumstances), but you have to be very careful
about how you go about the scenario you describe. It would be quite easy to land yourself with a massive tax bill if you are not clear about what you
are doing and be able to demonstrate the reasoning behind it
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craig_007
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| posted on 27/9/12 at 01:11 PM |
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That's magic chaps, makes a little more sense now.
As it stands just now we have no intention of buying to let but as stated above by Russ, it would make good sense if the property doesn't sell
to take a buy to let mortgage to release the initial capital to move on to the next project.
I think to begin with we would take as little a wage as possible from what ever profit we could make with a view to re investing what ever is left
over.
[Edited on 27/9/12 by craig_007]
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russbost
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| posted on 27/9/12 at 01:46 PM |
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quote:
Originally posted by JonnyS
quote:
Originally posted by russbost
Yes, small things add up, & you will invariably find costs you'd not budgeted for, so essential there is a decent margin in the property b4
you start, difficult to make significant gains in the current market & you might be better to do one up, then get buy to let mortgage to get your
investment back & take rental income, use the mortgage money to buy the next one & so on, if you just sell one or 2 a year most of your
capital gain will be tax free.
I'm not saying you can't do that (and I don't know all the facts about your precise circumstances), but you have to be very careful
about how you go about the scenario you describe. It would be quite easy to land yourself with a massive tax bill if you are not clear about what you
are doing and be able to demonstrate the reasoning behind it
Not possible to land yourself with a tax bill for the above situation - you are allowed as an individual to make £10600 (or thereabouts, not certain
of the exact figure) of capital gains in any one tax year, this could be on shares, other investments or a house or whatever or any combination
thereof. There is nothing dodgy or controversial about it, it is simply something that not many people are in a position to take advantage of.
If you persue the situation described above, you WILL get a tax bill on anything over the combined capital gain allowances, you cannot roll tax owed
forward on residential property, but you sometimes can on commercial - hence why it's essential to talk to a competent accountant who
understands ltd companies & tax law
I no longer run Furore Products or Furore Cars Ltd, but would still highly recommend them for Acewell dashes, projector headlights, dominator
headlights, indicators, mirrors etc, best prices in the UK! Take a look at http://www.furoreproducts.co.uk/ or find more parts on Ebay, user names
furoreltd & furoreproducts, discounts available for LCB users.
Don't forget Stainless Steel Braided brake hoses, made to your exact requirements in any of around 16 colours.
http://shop.ebay.co.uk/furoreproducts/m.html?_dmd=1&_ipg=50&_sop=12&_rdc=1
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NOTE:This user is registered as a LocostBuilders trader and may offer commercial services to other users
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cliftyhanger
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| posted on 27/9/12 at 04:23 PM |
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I believe if the intention is to buy/sell property, you can't claim capital gains allowance ( same as a shop selling baked beans, they
can't claim the capital gains allowance for their profits, over simplifying, but you get the idea)
If you buy a house as an investment ie rent out, then when you sell it it is capital gains.
regular buying/selling will be taxed as income. Needs serious advice. Especially with partners and big money involved.
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JonnyS
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| posted on 27/9/12 at 04:31 PM |
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quote:
Originally posted by cliftyhanger
I believe if the intention is to buy/sell property, you can't claim capital gains allowance ( same as a shop selling baked beans, they
can't claim the capital gains allowance for their profits, over simplifying, but you get the idea)
If you buy a house as an investment ie rent out, then when you sell it it is capital gains.
regular buying/selling will be taxed as income. Needs serious advice. Especially with partners and big money involved.
Correct, this is why Russbot is wrong. You have to be so careful with these situations. As noted, Russbot may be doing nothing wrong, but it could
easily be construed a different way. That's why these situations need input from an accountant.
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craig_007
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| posted on 27/9/12 at 04:50 PM |
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Yep, I'm going to get in contact with an accountant at the start of next week to get a few pointers and see what our next move is.
I don't think for a minute it will be a breeze, if that was the case there would be a dam site more people trying to punt property on at a
profit.
The situation we are both in with our own trades leaves us no option but try to create our own work.
Time will tell I dare say !!
[Edited on 27/9/12 by craig_007]
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russbost
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| posted on 27/9/12 at 05:01 PM |
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quote:
Originally posted by JonnyS
quote:
Originally posted by cliftyhanger
I believe if the intention is to buy/sell property, you can't claim capital gains allowance ( same as a shop selling baked beans, they
can't claim the capital gains allowance for their profits, over simplifying, but you get the idea)
If you buy a house as an investment ie rent out, then when you sell it it is capital gains.
regular buying/selling will be taxed as income. Needs serious advice. Especially with partners and big money involved.
Correct, this is why Russbot is wrong. You have to be so careful with these situations. As noted, Russbot may be doing nothing wrong, but it could
easily be construed a different way. That's why these situations need input from an accountant.
You are either both not understanding the situation & are misguided or you are both just plain wrong. I am talking about buying & selling as a
personal business, ie sole trader/partnership in which case you have a PERSONAL allowance of £10600pa (2011/12) it is no different to the fact that
you can earn £10k or thereabouts before you pay any tax on PAYE or whatever, it is an allowance given to you by HMRC.
From the government HMRC website
"Tax-free allowances for Capital Gains Tax
The annual tax-free allowance (known as the Annual Exempt Amount) allows you to make a certain amount of gains each year before you have to pay
tax.
Nearly everyone who is liable to Capital Gains Tax gets this tax-free allowance."
So perhaps b4 you make wild statements that I am wrong you might choose to get some facts rather than hearsay. I have bought & sold a number of
houses, I've paid capital gains on some in varying amounts & not on others, all sorted & agreed with HMRC or I would hardly be putting
it on a public forum. The only common exception I can think of is if you are not UK domiciled, then you lose the allowance.
If however you run things as a ltd company it is the company that has the tax liability not yourself, IIRC there are NO capital gains reliefs for a
company, in the example I gave above where you buy as a partnership then get a buy to let loan as a ltd company & sell the property to your own
company (has to be sold at "market rate" you may have no capital gains tax to pay at all as an individual depending on the sums involved,
but when the company sells the property some years down the line it may get a substantial capital gains tax bill - hence why I suggested seeking
advice from an accountant well voiced in these matters if you were to embark on such a scheme.
I no longer run Furore Products or Furore Cars Ltd, but would still highly recommend them for Acewell dashes, projector headlights, dominator
headlights, indicators, mirrors etc, best prices in the UK! Take a look at http://www.furoreproducts.co.uk/ or find more parts on Ebay, user names
furoreltd & furoreproducts, discounts available for LCB users.
Don't forget Stainless Steel Braided brake hoses, made to your exact requirements in any of around 16 colours.
http://shop.ebay.co.uk/furoreproducts/m.html?_dmd=1&_ipg=50&_sop=12&_rdc=1
|
NOTE:This user is registered as a LocostBuilders trader and may offer commercial services to other users
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BangedupTiger
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| posted on 27/9/12 at 05:14 PM |
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Most of the information in this thread is completely wrong. Ignore it all and speak to a Tax Accountant.
If you need any specialist tax advise drop me a U2U.
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craig_007
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| posted on 27/9/12 at 05:26 PM |
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Might just do that mate.
Thanks for the offer.
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JonnyS
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| posted on 27/9/12 at 07:31 PM |
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quote:
Originally posted by russbost
quote:
Originally posted by JonnyS
quote:
Originally posted by cliftyhanger
I believe if the intention is to buy/sell property, you can't claim capital gains allowance ( same as a shop selling baked beans, they
can't claim the capital gains allowance for their profits, over simplifying, but you get the idea)
If you buy a house as an investment ie rent out, then when you sell it it is capital gains.
regular buying/selling will be taxed as income. Needs serious advice. Especially with partners and big money involved.
Correct, this is why Russbot is wrong. You have to be so careful with these situations. As noted, Russbot may be doing nothing wrong, but it could
easily be construed a different way. That's why these situations need input from an accountant.
You are either both not understanding the situation & are misguided or you are both just plain wrong. I am talking about buying & selling as a
personal business, ie sole trader/partnership in which case you have a PERSONAL allowance of £10600pa (2011/12) it is no different to the fact that
you can earn £10k or thereabouts before you pay any tax on PAYE or whatever, it is an allowance given to you by HMRC.
From the government HMRC website
"Tax-free allowances for Capital Gains Tax
The annual tax-free allowance (known as the Annual Exempt Amount) allows you to make a certain amount of gains each year before you have to pay
tax.
Nearly everyone who is liable to Capital Gains Tax gets this tax-free allowance."
So perhaps b4 you make wild statements that I am wrong you might choose to get some facts rather than hearsay. I have bought & sold a number of
houses, I've paid capital gains on some in varying amounts & not on others, all sorted & agreed with HMRC or I would hardly be putting
it on a public forum. The only common exception I can think of is if you are not UK domiciled, then you lose the allowance.
If however you run things as a ltd company it is the company that has the tax liability not yourself, IIRC there are NO capital gains reliefs for a
company, in the example I gave above where you buy as a partnership then get a buy to let loan as a ltd company & sell the property to your own
company (has to be sold at "market rate" you may have no capital gains tax to pay at all as an individual depending on the sums involved,
but when the company sells the property some years down the line it may get a substantial capital gains tax bill - hence why I suggested seeking
advice from an accountant well voiced in these matters if you were to embark on such a scheme.
I will not go over this again. I'm sorry but you are incorrect and everyone should ignore this advice. I AM A CHARTERED ACCOUNTANT WITH TWO
DECADES EXPERIENCE. Please do not post information based on your own personal experience in these situations. I deal with these situations every day,
ranging from one man with one property to a client with 500 and a net worth of £100m.
I'm not trying to be disrespectful
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JonnyS
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| posted on 27/9/12 at 07:32 PM |
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quote:
Originally posted by BangedupTiger
Most of the information in this thread is completely wrong. Ignore it all and speak to a Tax Accountant.
If you need any specialist tax advise drop me a U2U.
Most apart from what I have posted This is very basic stuff, but unfortunately people read it and act upon it. Just the same as the 'armchair
lawyer', unfortunately the same is true when it comes to tax 
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nick205
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| posted on 27/9/12 at 08:31 PM |
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No experience with property buying/selling, but having recently gone through buying (with others) my previous employer after they went bust last year
I can only echo the advice of contracting an experienced tax accountant to deal with these matters. Be completely honest with them about your
situation and intentions and if they're any good they should achieve the best outcome for you. At the very least they will keep you on the
right side of the tax man!
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