Property Can Be Taxing …But Good Advice Can Bring Significant Reliefs
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Property investors need to be sure that they have capitalised on all their potential tax reliefs (which can be surprisingly significant). They also need to be equally sure that they are not inadvertently creating any tax nightmares, either now or in the future.
It always pays to be savvy about the tax efficiency of property deals but even more so when the markets are tight, and especially with capital gains tax increases on the horizon.
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To ensure that a property deal is tax efficient, a co-ordinated approach and consideration of the key property taxes issues is required, such as:
Structuring
It is the structuring that will drive much of the tax efficiency in any property deal, so it is important to review this as early as possible in the process.
Tip: Most agents will have proposed Heads of Terms, which summarise the main terms of the deal. It is important to take advice early on in case these create tax inefficiencies. If so, it is always worth considering changing the offending terms, before it is too late.
Capital Gains Tax and Inheritance Tax
A property deal can be organised to mitigate CGT, but if this is the case, investors also need to consider what the potential longer term plans are and what the impact might be on any IHT position.
Tip: If your accountant has not asked you about your longer term plans for the property, then chances are that the structuring of the deal may not have included a full consideration of the inter-related tax issues of CGT and IHT.
Capital Allowances
Capital allowances can save you significant sums but this is often a neglected tax relief. Capital Allowances is a little understood (and much under-utilised) form of tax relief which is available to taxpayers who spend money on commercial property. When used effectively, Capital Allowances can create substantial tax savings - even in some cases where expenditure was made several years ago.
If you have bought, built or refurbished commercial property in the last few years, it may well be a profitable exercise to review your portfolio to ensure you have claimed the full amount of relief due to you. Unsurprisingly, HMRC will not alert you to any under-claimed relief!
Tip: As far as the Capital Allowances relief is concerned, it is common for everyone in the chain to believe that someone else (usually the accountant) is “taking care of it”. But we know from experience that this relief is rarely fully explored. Check with your accountant that they are fully exploring your Capital Allowances relief, ensuring that they have experience and qualifications to deal with Capital Allowances on your behalf.
VAT and Stamp Duty Land Tax
The implications of SDLT and VAT can be huge. The continuous, and often major, changes make the considerations ever more complex and onerous.
Tip: There may be an SDLT saving scheme that can be used to make a substantial tax saving, and even mitigate your SDLT liability to zero, but the rules are complicated and you need proper advice from a specialist. VAT is also a complex area and we will work with your other advisers to interpret the legislation relating to VAT, how it interacts with SDLT, and how it applies to every type of property development and transaction.
Health Check your Property Deal
We work with firms of accountants who have specialist property tax expertise. Please contact us if you would like to discuss any potential transaction, or if you would like an introduction to a specialist property tax accountant for an early ‘health check’ indication of how to structure any property deal.
The earlier you speak to us, the better. Many tax relief opportunities can be lost if they are discovered too late in the day. For further details please contact Richard Gordon (rkg@silvermansherliker.co.uk) or Maria Guida (meg@silvermansherliker.co.uk) or call them on +44 (0)20 7749 2700. |
