Capital Gains on flip and reinvestment

by Readers Question

9:45 AM, 25th January 2015
About 6 years ago

Capital Gains on flip and reinvestment

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Capital Gains on flip and reinvestment

Firstly excellent forum, thank you. Capital Gains on flip and reinvestment

We recently purchased a property and refurbished it to a high standard to let out. Due to sudden rise in house values in our area we decided to flip it and make a profit.

We exchanged contracts last Friday and we’re completing next week.

The total proceeds from this property are going straight into another property that will be let out.

Question is; will I be liable now for any tax of any kind if full value plus more is going straight into another property?

There is no mortgage involved.

I appreciate seeking professional advice etc., but if it’s a simple answer, ha ha, that might not be necessary.

Just to say we have used recommended services on here, insurance, and will be using Letting Supermarket to let the latest property having spoken to Tony Sheldon.

Thanking you in anticipation.

Regards

Dennis Leverett


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Comments

Mark Alexander

9:53 AM, 27th January 2015
About 6 years ago

Reply to the comment left by "Chris Law" at "27/01/2015 - 09:33":

Probably NOT.

You would need to be able to PROVE that the property you are selling is your PRINCIPAL PRIVATE RESIDENCE.

This linked article has more details >>> http://www.property118.com/capital-gains-tax-relief-on-a-property-you-have-lived-in/

There are several more articles and discussions regarding CGT available to read via this link >>> http://goo.gl/y5Luqu

I hope that helps 🙂
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Michael Barnes

16:15 PM, 27th January 2015
About 6 years ago

Reply to the comment left by "sharon underwood" at "25/01/2015 - 09:58":

That is what I was told by a tax inspector when my niece said it was what she was doing. (yes it was a tax inspector and not the person that answers the phone).
That was about 2006.

Perhaps it is one of those things that was not allowed in law but was informally allowed by the tax man but is now being tightened up on (like renewals allowance for unfurnished properties).

Mark Alexander

17:00 PM, 27th January 2015
About 6 years ago

Reply to the comment left by "Michael Barnes" at "27/01/2015 - 16:15":

Hi Michael

I am CERTAIN that your tax inspector friend gave you bad advice.

If you ever want to rely on advice from HMRC or any other professional please make sure you get it in writing. That, at least, should absolve you from a fine and if the adviser is an insured and regulated professional (I am not) then you will also have the protection of Professional Indemnity Insurance.
.

Michael Barnes

17:17 PM, 27th January 2015
About 6 years ago

Reply to the comment left by "Mark Alexander" at "27/01/2015 - 17:00":

The tax inspector was not a friend. I called my tax office and spoke to a tax inspector.

I didn't believe it until I had spoken to the tax inspector.

I agree with your advice on getting anything like this in writing; I didn't in this case because it was not for me.

Mark Alexander

17:18 PM, 27th January 2015
About 6 years ago

Reply to the comment left by "Michael Barnes" at "27/01/2015 - 17:17":

Understood, however, I remain adamant that the advice given to you was incorrect.
.

Puzzler

17:27 PM, 31st January 2015
About 6 years ago

Reply to the comment left by "Michael Barnes" at "27/01/2015 - 16:15":

Mark is right, if a tax inspector said that, it may well be that s/he was not given the full facts when the question was asked. It is only businesses which can roll over relief in that way and was the case in 2006. If your niece didn't declare her capital gain for those reasons she has broken the law (although unwittingly) and could be liable for a big penalty.

Dennis Leverett

18:11 PM, 31st January 2015
About 6 years ago

Hi Guys

Thanks for all the comments, guessed that was the case, I'm just an optimist.

The West Brom result is just so annoying, it seems more and more that decisions up top are being made by people that just do not have clue or even think about the consequences of these decisions. The whole world is rapidly going to pot!!!

Nick Pope

9:01 AM, 1st February 2015
About 6 years ago

Just a comment on whether the purchase and sell on will be regarded as a trade with income tax payable rather than CGT.

in 2009-2011 when I had been made redundant I got into a little mild development and over a 2 year period bought and modernised 3 houses. These were done in joint names with my wife. We were advised by our accountant that this was the most we could without HMRC assuming that it was "trading". We simply declared them for CGT purposes, took our annual allowance (we made sure each one fell into a different tax year) and paid the CGT on the remainder which was considerably less than the income tax payable ( I was, by then, gainfully employed). However the accountant was very specific that if we did another HMRC would consider it to be trading and subject to income tax.

So far as rollover is concerned it is in fact possible but NOT for an individual. You would have to set up a company to buy, do up and rent out or sell and then financing would be much more difficult and the tax situation more complex. On the up side there would be opportunities to sell or gift shares to children to save Capital Transfer Tax when you shuffle off.

Mark Alexander

10:54 AM, 1st February 2015
About 6 years ago

Reply to the comment left by "Nick Pope" at "01/02/2015 - 09:01":

Hi Nick

I agree that Company taxation is very different.

May I assume that in your reference to Capital Transfer Tax you meant Inheritance Tax?

With regards to the two developments you did whilst you were out of work in 2009 to 2011 there must have been another reason that you were taxed on the basis of CGT as opposed to trading income. If not, keep your head down on this for a few more years because the file could be re-opened.
.

Jason Holden

15:29 PM, 1st February 2015
About 6 years ago

Firstly, to the original poster, you are referring to Business Asset Roller Relief, the clue is in the name, think business assets not residential.

Next, HMRC and their Inspectors do not give advice, they are not insured to do so, also, Inspectors are frequently wrong in their interpretation of tax law, this is evidenced by the number of failed cases brought by HMRC against individuals and businesses.

Finally, this is one of the best property based forums on the internet and Mark certainly has a wealth of knowledge and experience, but you can not beat taking professional advice, trust me, a decent accountant/tax expert is well worth the money.

Jason

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