As accountants in West London we understand the high prices involved in buying a new property, especially if you plan to develop it. That is why we at Harnett Accountants in Richmond have these few simple facts/tips to try and keep those tax issues at bay.
If you purchase a property with the intention of developing it for profit it will become subject to income tax worth up to 50% rather than the usual capital gains tax of 18-28%. If you make it a habit of developing properties and selling them on the Taxman will want to view the property as a trade. This means your free capital gains tax when you sell your property will become exempt – if caught still receiving it you will be open to tax investigation. Furthermore, if your new property includes a significant amount of land (excess of half a hectare) you will be eligible for capital gains tax.
It is also important to remember when developing a property the cost of VAT. If you are not a registered VAT builder you cannot reclaim VAT on the development costs. However there is a scheme (although a number of conditions apply) that allows DIY builders to reclaim VAT when a non-residential building is being converted into a home. Another possibility to save on VAT is if the building you are developing has been empty for at least two years you will be charged at a lower rate of 5% VAT. Once again a number of conditions apply for this.
If you are looking at property development it is important to get advice before proceeding. Harnett Accountants in Richmond can help you with this, and don’t forget we offer a free hour no obligation consultation for all our new clients. Additionally, why not continue to follow our regular informational blogs or add us on Facebook or Twitter.
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