On Tue, 13 Nov 2012 07:49:34 +0000, Lobster
wrote:

Had the same advice myself. What I think the above boils down to is
whether your new 'business' is primarily one of 'property development'
or 'letting'. We sold our property after 3 years, paying CGT, and it
didn't catch any attention from HMRC. I suppose you just need to do
the sums (paying income tax versus paying CGT and renting) and work out
for yourself which will be best for you.

I enjoy doing DIY around the house and thought I would like to try
property developing; doing as much as I can but getting people in
where I can't (physically or legally) do the job.

From my very limited knowledge, I think you get to keep a higher
percentage if you pay CGT. Each partner has an annual £11,000
allowance, so you would not pay CGT on the first £22,000 of the
profits. The personal allowances with income tax are much smaller and
these would be eaten up by our wages (as we are new to this, we would
keep our day jobs as back-up).

The CGT route is only useful if your plan is more long-term. If I
wanted short term returns, for example buying property two with the
profit from property one, I would have to go down the income tax
route. I think you become a 40% payer at £42,000, which is a lot of
money except when you talk about property. WRT to property £42,000 is
not very much. On the other hand, I suppose it is only profit that is
taxed not the sale price. I'm only looking at a mid terrace, so the
profit will be more modest.

Not sure about beneficial ownership however if you don't own the property
jointly when you come to sell it, then you can't take advantage of your
partner's CGT allowance, which is a no-brainer.

That's what I thought originally but now I am not so sure. I have
googled "beneficial owner" and some of the results are from HMRC. They
contradict themselves. It says that the beneficial owner will have to
pay tax regardless of whether they are the legal owner but on another
page they say one way they identify the beneficial owner is by looking
who the legal owner is!

I think this concept of beneficial ownership only has two uses: for
tax and in divorce, allowing someone who is not legal owner a share of
profits from a house solely in a partner's name.

Stephen.