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We have 200k to invest in buy-to-sell. Any advice?

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Charlottesquare
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Re: We have 200k to invest in buy-to-sell. Any advice?

#355770

Postby Charlottesquare » November 12th, 2020, 10:04 am

Mike88 wrote:
modellingman wrote:
Mike88 wrote:
The intention initially is to grow capital via buy to flip.


Yes, but the activity might well get classed as a trade by HMRC. See https://addictedtoproperty.co.uk/property-flipping/ for a bit more detail.

Buy-to-let is not usually classed as a trade even though, with the exception of borrowing costs, it is pretty much taxed like one.


Thanks. I didn't gain the impression the OP was intending to be involved in a trade. Over the next 3 years I assumed he was intending to buy cheap houses, one by one, renovate and sell at a profit in order to build up capital possibly using auctions such as the people on the TV programme "Homes Under the Hammer". After an initial period, and as things progress after buying say a couple of houses, wouldn't then the business issue come into play? As he only has £250k to spend there will be no stamp duty if he buys and then completes before 31 March 2021.

My assumption was that CGT would be his main concern, initially at least, but that will depend on whether he is flipping or running a business in the eyes of HMRC.


Flipping with intent to flip is a trade, something these daft programmes skate past, it readily ticks the "Badges of Trade"- if I buy widgets, polish them then resell them with an intent to make a profit that is a trade, repeated house buying with no intent to either live in the house myself or let to others to live in is little different to the widget polisher.

Edit- whilst repetition is a useful Badge of Trade hallmark it is not always necessary, one does not need to tick all the badges. See the toilet roll case.

RUTLEDGE V. THE COMMISSIONERS OF INLAND REVENUE

COURT OF SESSION, SCOTLAND (FIRST DIVISION)

14 Tax Cas 490, (1929) Sc 379

HEARING-DATES: 8 MARCH 1929

8 MARCH 1929

Also note, it is not a matter of HMRC stating what it is, Self Assessment requires the taxpayer to decide and HMRC to challenge or otherwise with all the risks of interest and penalties if he is subsequently determined to have got his interpretation wrong (with mitigation if his treatment was reasonable but wrong, which I do not believe treating as CGT it would be), in the described circumstances he needs to consult an accountant and whilst I am now retired from practice my conclusion, based on the fact that the initial intention is to improve and then resell, is that this is a trade from day one, if the "facts" are different it might be possible to argue otherwise but on the basis of the information given I can see no argument that the first property is not trading.

Charlottesquare
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Re: We have 200k to invest in buy-to-sell. Any advice?

#355809

Postby Charlottesquare » November 12th, 2020, 11:34 am

ReallyVeryFoolish wrote:I realise it's off topic but I can't help but wonder how rich a seam of tax evasion house flipping would be if HMRC made a determined effort to look at the whole merry go round. I do have personal knowledge of repeat flippers flying under the radar (and BTLers too come to that). Given the popularity of such TV programmes, a casual viewer might be given the impression there's no personal tax liability in flipping properties. The emphasis seems to be wholly on "how easy" it is to make thousands of £££ from such activity. But that's the media for you. I suppose.

RVF


There have been a few cases over recent years though I would have to dig through Accounting Web to find them and its search function is not great, HMRC have certainly taken more of an interest in recent years. In addition the new 30 day notification rule re CGT now gives them indications of potential disguised trading transactions much sooner than previously. Frankly if I were HMRC I would look at every transaction where the purchase and sale were within 18 months of one another.

realestate
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Re: We have 200k to invest in buy-to-sell. Any advice?

#434247

Postby realestate » August 12th, 2021, 6:57 am

Investment requires a lot of strategy and planning. One should never be in a hurry to invest in anything whether it B2S. Always go through articles or take help from experts.


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