We have a client who is looking to offload a property in 2012/2013. He purchased it for £55,000 and reckons he'll get about £190,000.
Fuming about 28% CGT on the higher rate.
He was told by someone down the pub that putting it in a company would solve the problem, but that would surely be an arms length transaction and would still raise a CGT liability.
He says he should get Entreprenuers relief. I've told him no. He won't have it and wants me to see how he can get out of it.
Was talking about buying a shed in Venezuela and changing his domicile and residence to not pay this beeping government.
Any ideas?
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Replies (26)
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Get the bloke
down the pub to do his accounts and tax returns.
Seriously though, if he needs to pay tax, then he needs to pay it. If he had ideas to sell the property he should have given you some advance notice.
What is his main reason for selling - to generate cash or profit? How about renting the property out and getting a commercial loan based on the property value/rental income. This will give him a lump of tax free cash, defer any CGT liability and perhaps allow you to plan how to dispose/transfer the property in a tax efficient manner at some point in the future.
Shocking headline reads.....individual doesn't want to
pay tax.....
as the others have said - perhaps he should get his accounts/tax doen by the guy in the pub. Mind you moving to a shed in Venezuala sounds very tempting to avoid the uk tax - scratch the above....I'd like to see him do this instead.
Just sell it a bit at a time
If you sell the purchaser a 7½% interest each year, the gain will be covered by the annual exemption. Should all be done and dusted in about 10 years.
Is he in good health? There will be an uplift on death.
.
Clients eh, dont you just love 'em
Why not suggest he just doesn't bother declaring it at all and you resign? Everyone would be a winner, all you would have to do is a ML report!
Just how much......
.......does he want 'to be done with it'? Not 28%, by the sound of it!
Knowing nothing of the value of his estate....but death can tax efficient if he's under his nil rate band of (possibly) £650k! He'll get his tax free uplift!
When re-reading this fascinating expose of the human psyche relating to taxation I found the above. Are HMRC investigating him or is it to small to bother with.?
Did you do his tax return with the omission or your predecessor? Also what else has he left off?
Is that unfair as well or just the CGT?.
Seriously is he married and if so why not give it to his wife - nil tax and she can then support him by paying your bill for the collective advice - mine's a pint
Is this his only big asset.? Why not sell the family house (nil tax) downsize and liberate cash that way. Did I miss why he has to sell?
Have less and less sympathy for this guy....
if he doesn't want to pay the tax, then his only choice is evasion....but sounds like he already has a track record for that.
The price we pay for living in a society which provides for the poor and elderly (presumably he gets a state pension, winter fuel allowance, bus pass etc) is tax....end of. He may not like it, he may disagree how this money is spent, and he may think every MP is just a greedy indiviudal with his snout in the trough....but if that is the way he thinks....then the door is over their...close it on your way out!
And don't tell me........he is one of those clients who will appreciate your help and will no doubt pay you a premium fee in order to reduce his overall tax burden.....yeah right?
Well yes I agree with all your comments but of course he doesn't want to pay the tax. Funnily enough he's buying a new house to move into but doesn't want to sell the family home, so he'll keep that his original one.
Regarding his rental property he doesn't want to pay the tax. Lovely isn't it!
This client sounds like a dodgy character and one you are best shot off unless he agrees to toe the line
Not sure (due to his age)....but could he not raise a buy to let
mortgage on the property he wants to sell and then use those funds to purchase this other house. Then he would get tax relief to set against his rental income of the house he intended to sell (hopefully reducing the taxable income significantly) but also being able to buy this second property without having to sell this asset and incur the tax charge.
Just a thought.....(hard to give advice without all of the facts but perhaps this may be an alternative).
He'll find it almost impossible to get a mortgage/loan @ aged 75 except by paying extortionate interest rates
.
How about you charge him £1000+VAT for a fixed fee report into the suggestions of the "man down the pub", and demonstrate with quotes from legislation and cases why it wont work, pretending at the outset you think there just might be something in it!
Show both that you are right, your technical abilities and take some cash off the git.
nice one @ireallyshould
@bernard....'almost'......i just suggest it as the loan to value for a buy to let will be at most 75% - so the rental yield vs mortgage interest should be within the limits. Using my own logic (which may well be flawed) I would have thought this was a low risk for a bank - mortgage secured against a property when property value is as low as it comes. Obviously the mortgage is paid by the tenant so in theory no risk there.
As for a high interest rate....just means more to set vs rental income (so perhaps not a bad thing?).....I guess he could get some sort or term assurance - again this will be expensive....but i am just looking at some options......currently 'in theory' we are looking at playing with a 30k tax liability so anything that will cost him less than this to enable him to do what he wants could be worthwhile.
In theory you're right but most lenders slap a 70 years age stop on property loans. I tried to get one recently for a client with a 50% cash deposit but aged 72. No chance!
PPR
If this is a residential let property, he could move in for a while prior to moving on to the next property and claim up to 6 years' worth of principal private residence relief. That should make a decent dent in his bill.
fair point....I guess you just need to search out a few mortgage
specialists - never know what is out there.....
Mortgage for an OAP
I have just got a mortgage with a building society via a mortgage broker for a client who is 72 years. The mortgage is for 10 years and the mortgage rate is 4.5%.
It is possible with the right amount of equity and mortgage broker
Tell him ...
... the proposal from the man in the pub won't work, but that you're happy for him to go ahead with it. But ask him if he'll then be handing that guy in the pub the bill for £1,900 SDLT. Plus, of course, the CGT.