Will a CGT event occur for all FHL in April 2025?

FHL will be under rental rules, to establish a purchase value will the FHL CGT be payable

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My FHL valuation is materially higher than the sum of purchase cost and subsequent capital improvements. I intend to continue making it available for letting. As it is intended to abolish the FHL regime and changes of approach to using a property eg. residential use or full time rental would usually trigger a need to determine value for CGT, is there a reason in the rules or guidance why such a requirement would not apply to all FHL at the point of legislation introduction? 

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By David Ex
12th Mar 2024 12:22

Your accountant will be able to update you when details of the proposals are published.

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Northumberland flag
By MJShone
12th Mar 2024 12:40

Mark Penney wrote:

changes of approach to using a property eg. residential use or full time rental would usually trigger a need to determine value for CGT 

????? Where does it say that in the legislation????
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Replying to MJShone:
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By Tax Dragon
12th Mar 2024 12:42

I agree, this is nonsense.

Answer to OP's headline is "no".

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paddle steamer
By DJKL
12th Mar 2024 12:53

The only occasion I can think where intention change might trip a tax charge would be appropriation from trading stock to investment property (there are bound to be others).

You can continue being a furnished letting business (subject to ever tightening local authority permissions/planning/building control etc) , you will just report profits and relieve interest if held personally as if you were any other residential property letting business and within a company will likely continue to relieve interest as a NTLR debit.

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By More unearned luck
12th Mar 2024 15:06

Perhaps a more relevant question is what will happen about capital allowances? Will balancing charges and allowances be required as at 5/4/25? Will there be spreading relief for BCs?

Also the general interest restriction was was phased in over 3 years. Fairness seems to suggest the same should happen again, but there is no equity in tax, I hear you say.

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RLI
By lionofludesch
13th Mar 2024 06:58

Where do folk get these ideas from?

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Replying to lionofludesch:
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By Tax Dragon
13th Mar 2024 09:37

Fairness and equity? No idea.

Also, if this is righting an existing wrong (unfairness), why would it need phasing in? Wouldn't that serve to extend the wrong?

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Replying to Tax Dragon:
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By More unearned luck
13th Mar 2024 11:06

The point is that someone who had purchased a property to run as an FHL with an mortgage shortly before the Budget will find that their business plan, which would have assumed full relief for the interest, seriously compromised and they will need time adjust. How can you expect people and businesses to make long term plans if the tax rug can be pulled from under their feet in a trice?

If the FHL regime is wrong, presumably it was wrong to introduce it in the first place. “The nation should have a tax system that looks like someone designed it on purpose.”

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Replying to More unearned luck:
paddle steamer
By DJKL
13th Mar 2024 12:19

Nah, we have always had a Camel- a Horse designed by a committee, it is what we are used to.

Hate to say that if they were so heavily geared that 20% or 40% relief on interest totally makes or breaks then they did not plan their business they merely lurched into it with too much debt.

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Replying to DJKL:
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By Mark Penney
13th Mar 2024 15:42

Clearly tax is only one consideration when starting a business. However in the last two years the cost of debt has roughly increased to five times that level, then reducing the offset creating perhaps an additional tax liability. It could hardly be thought of as “lurching in” and would perhaps have been a business recommended by many. The return on investment in the new rates environment and regime seem poor, and seem to reduce incentives for improvements.
My question stemmed from a concern that there may be another unforeseen adverse effect to this as an ongoing business. I am grateful that the general consensus is that CGT will not be triggered, though allowances are yet undetermined.

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Replying to Mark Penney:
paddle steamer
By DJKL
13th Mar 2024 17:14

Yes, that is why one prepares a sensitivity analysis when doing property projections and one leave lots of headroom for the just in case it happens moments, property letting can be like sailing an oil tanker, very slow to turn and heavy gearing and low liquidity is a recipe for financial embarrassment, so keep lots of powder dry (big cash float)

LTVs need to be very low in low interest rate environments (the only way is up) unless rates can be fixed or hedged.

The big risk to FHL is regulation , for instance Edinburgh Council. They have been having a field day re licensing and the need for planning permission to even operate an AirBnB. (I heard the stand off might be going to court as Council refused pretty much carte blanche to give any permissions for new ones)

In property always have a Plan B

https://www.bbc.co.uk/news/uk-scotland-edinburgh-east-fife-65544326

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Replying to lionofludesch:
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By Tom+Cross
13th Mar 2024 14:15

Facebook, X, Tik Tok. Man down the pub is now old hat.

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Replying to Tom+Cross:
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By Paul Crowley
13th Mar 2024 16:29

Had one in today.
Got his clever tax ideas from Tik Tok

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