Top ten property tax tips
The Government has turned its attention very much to maximising its tax revenue from property over recent years.
Generally, one needs to have one eye on the bigger picture (will the activity be treated as an investment or as a trade?) and the other on the finer detail, including the type of property.
1. Are you a property investor or a property trader?
One might think that this is a matter of semantics. However, it is not. We do not have a flat property tax. Like most of the UK tax system it is not the underlying asset which is determinative but what you do with it? If you buy properties for the long term to harvest the rents and hope for capital appreciation then you are likely to be a property investor and subject to the capital gains regime on a disposal.
2. Don’t forget to document your intentions
Once you have been able to make the distinction above then you should record your intentions and ensure that the correct accounting disclosures etc have been made. Recent case law has shown that a dispute can turn on such paper trails.
3. Determine whether you are a commercial or residential landlord
Once you have determined that your planned activity makes you an investor we then see material differences between the treatment of residential and commercial property. For example, where the rate of CGT fell to 20% recently (including for commercial property investors) residential landlords were left with their gains subject to 28%. One should also note that the Stamp Duty Land Tax (“SDLT’) rates are rather different for residential and non-residential properties. The latter usually being lower than the former.