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General builder and speculative developer - CGT or income tax?

Just had discussions with a new client who is a general builder and only works for private individuals renovating etc. He has also bought a property with another individual with the intention of extending, developing and selling. No partnership was set up and the previous agent had advised that any profit could be dealt with through CGT and not income tax. Materials were purchased under a developments trade name and paid by the two individuals from the funds raised, but the labour was invoiced by the client to the development and will be paid once the property is sold! Any remaining profit will then be split between the client and the other investor. I feel that they're trading as they're considering purchasing another property after sale and the initial intention was to develop and sell, but the client will then have invoiced himself for the work carried out!


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By ACDWebb
04th Dec 2012 17:35

Sounds more IT than CGT

Their intention was not to hold as an investment for a rental stream, but do up & move on quickly.

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04th Dec 2012 17:57

Income Tax, surely ?

I'd say this is fairly obviously an Income Tax matter, as it's being bought with the intention to improve & sell on, hopefully making a profit.

CGT would probably only apply when it was bought as an investment etc., but they genuinely decided later to sell due to change of circs or something.

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04th Dec 2012 18:23


Thank you, these were my views too, I don't act for the other investor and I get the impression that he will not be willing to set up a partnership, could be an interesting conversation!

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The involvement of the builder...

... is most certainly fatal to any hope there might be that it could be treated as capital. See BIM60080.

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Partnership is as partnership does ....

so the absence of a formal agreement means very little. In this case it looks like the most common sort of property development partnership. Get it registered pronto and remember non filing penalties will apply to each partner so double the normal grief!

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