If a property was bought for say £100K and then developed over two tax years and then sold for £200K, is there any way that the £100K profit can be spread over the two tax years (and hence less of it will be taxable @ 40%) or is the profit all asssessable in the year of sale?
Ian Riley
Replies (3)
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You do not say how you plan to tax the gain
ie income tax, CGT or even s776? If it is trading then you apply normal accounting principles and draw up accounts each year. This would include a proper valuation of work in progress at the end of the first year, which would probably have the effect of spreading the profit although not necessarily 50:50 between the 2 years. If you consider it is CGT then of course all taxable at the end.
Trade or investment
couple of thinking points for you....
(a) if it's a trade then any loan interest allowable in arriving at the profits along with all costs of "development"
(b) if CG applies then any costs that would have been allowable revenue expenses if asset used in a trade would not be allowable against CG
(c) if profit taxable in earlier period then clearly interest for an extra year would be exigible
(d) I don't suppose that any of the properties were ever let out therefore removing the natural assumption or conclusion of trading.
Then of course there will be the incidence of penalties to be considered if as you say HMC have "uncovered" them and I have to ask why your client has gt imself/herself getting caught out in this way
regards
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