Property Investor and Developer Business Program
Welcome to our business program for property investors and developers.
We have lots of blogs and videos we would love to share with you.
There is often a lot of confusion between property investment and property development and we find that most of our property clients do both investment and development.
In simple terms property investment is the purchase of a property for it’s investment potential- ie rental income and in the long run capital growth.
Property development is short-term development of a property in order to add value to the property and dispose of the property for a profit. Property development is a trade. Properties are not held for their investment potential but simply to turn a profit in a relatively short period of time.
This distinction was emphasised in a video we did back in 2019. Please note that since the video was produced there have been some changes in legislation such as the removal of letting exemptions in most circumstances and changes in some of the tax rates. However the video itself explains in detail some of the fundamental issues which need to be addressed in order to differentiate between investment and development.
This was further highlighted in a blog we wrote in 2021: the 10 most common tax mistakes we see property developers make. In the blog we look at the confusion property developers have in respect of the tax treatment of a development and their incorrect assumption that the sale of a property is liable to capital gains tax rather than a trading profit as well as many other common tax mistakes made.
In the video above we mention the fact that property developers need to operate a construction industry scheme. In the video below we look at what a CIS scheme is.
In the next video again we look at property development and the need to ensure you review VAT on every development. Most renovations of residential properties are exempt from VAT but many aren’t giving opportunities to recover VAT on expenditure or the potential pitfall of having to charge VAT on a supply. Our advice is simple. For every property development speak to your professional advisor to ensure that there are no pitfalls or potential opportunities to save tax.
In the above video we mention a second video related to the builders. If you are a builder then please visit our business program for building and construction businesses where we look at the new rules for VAT which came in to play in 2021 and have a whole series of videos specifically designed to help you.
For property investors there is a lot to consider. With the changes in mortgage interest relief owning a large portfolio of properties in your personal name can be expensive as interest relief for mortgages is restricted to the basic rate of tax for individuals. Incorporation is something which many property investors have considered but it isn’t as straight forward as simply moving a portfolio of properties in to a company. There are capital gains tax and stamp duty issues to consider as well as issues in respect of refinancing. We haven’t prepared a video on this due to the complications surrounding this subject but if you do have a large portfolio of properties in your personal name we can advise on ways to minimise your tax exposure.
In our final video below we look at the problem if you are a property investor and haven’t declared income to HMRC. The let property campaign has been designed by HMRC to assist property investors who have not declared their rental income to get their affairs in order. HMRC now have access to the land registry and with capital gains tax returns required for the sale of residential properties the net is closing very quickly so it is essential that all property investors get their affairs in order.
Property development and property investment is a complicated area of tax and we hope from the above that you appreciate the value in getting an adviser well versed in assisting investors and developers to minimise what can be significant tax liabilities. The key however is to plan ahead and ensure that you set up the right structures from the beginning. The high cost in professional services (accountants, solicitors and tax) arises primarily from doing things first and then getting the advice!!! If you have a portfolio of properties or are looking to get into property development or investment then please contact us to arrange your discovery meeting.