- Accounts submitted to HMRC & Companies House
Property and business tax Q&A
It is always worth asking a good question to get the answer that you need. There is a great saying. “You do not know what you do not know”. How can you possibly ask a question if you are not even aware of it? This is why Optimise Accountants have put together a show to help people understand the tax implications of their business and property-related activities. A lot may be learned by simply listening to other people ask questions and understanding the answers to see how they may relate to you.
What we can provide answers on
It does not matter if you are selling products, services or generating an income from property, you will still need to know the best tax structure.
There are many forms of tax that you need to consider as a business owner or a property investor/developer. You need to navigate around the tax minefield and make the right choices ahead of time to avoid costly mistakes
You may be a business owner or a property investor that has activity in multiple countries. It is one thing to be tax efficient in one country but an art to be tax efficient globally.
Property & business tax questions answered
Whether you are a business or a property investor, you will have a number of tax-related questions that you need to answer. Optimise Accountants co-founders Louise and Simon Misiewicz put together a live question and answer session for you to ask your questions and have them answered live.
What guidance will be provided to you?
Louise and Simon will cover all manner of questions that relate to your business and property investments. These may range from:
– Starting out in business or property investment journey
– Funding your business or property investments
– Stamp Duty Land Tax on buying residential or commercial investments
– Stamp Duty on buying shares
– Income tax or corporation tax on the profits made in your business or property portfolio
– Value Added Tax (VAT) in your business or claiming on your property portfolio
– Capital Gains Tax (CGT) if you are planning assets such as shares or property
– Inheritance Tax (IHT) or wealth & legacy planning
Frequently asked questions
Don't you just love clichés? Neither do we, really. The sad truth is that this is a very complex question to try and answer. It does very much depend on the business/investment and your lifestyle needs.
Someone that does not need the money from the business or investment activities may be best to use a limited company. This is provided that they are high rate tax payers?
What is you are a basic rate tax payer? The best tax structure may be to have the investment and business activities just in your own name and avoid the complexities.
Then there is risk...but that is a story all onto itself
Value Added Tax (VAT) registration is a requirement for business owners that sell products or services in the UK and has a turnover/income of £85,000. This means that they will now need to charge VAT of 20% (typically) on top of their initial prices. This means their customers/clients will end up paying more. This does mean that business owners can reclaim any input VAT that they are charged by their suppliers on their quarterly VAT return.
For many business owners VAT can be a little too complex. This is where a VAST flat rate scheme may come into its own. It is simple to use and will require much less paperwork to carry out the calculations.
What about property investors? Rent is VAT exempt. This means that the UK landlords does not charge VAT to their tenants. As they do not charge VAT to tenants it also means that they are unable to claim back VAT from their suppliers.
What about property developers? This is a complex area and each element of work requires serious VAST consideration before starting
On the face of it paying tax is a simple question that leads to more complex answers. The reason is that someone that has £100 sales less £50 worth of costs makes £50 profit. You would think that tax is based on the £50.
Sadly this is not always the case as business owners and property investors are also allowed to claim certain tax credits that is based on a fixed asset that purchased during the year.
There are a variety of costs that are not allowed, even though they are shown on your profit and loss account. This means that certain costs would be taken out and profit increases, which is what tax is based upon?
There are a number of factors that you need to take into account when trying to figure out your tax liability.
There is a tax called Capital Gains Tax (CGT). This is charged when you sell an asset. The amount of tax and the rate of tax depends on a number of factors.
One consideration around CGT is the tax structure you use in your business. If you sell an asset in a limited company then the tax rate will be the same as the corporation tax rate, which is 19% up to £50,000 profit and increases to 25% (from 2023) once the profit increases to £250,000. There is a scaled rate tax charge from 19% to 25% but you will need to speak with your tax advisor about this.
Selling an asset that you own in your personal name may be free from tax altogether. This is because certain assets are not charged to CGT at all. Please speak with your tax advisor on this. Additionally, individuals are allowed a CGT annual exemption. This is circa £12k, which is allowed to be gained from selling an asset without paying tax. This is of course doubled for couples living together.
If an individual sells a taxable asset above the circa £12K rate then there are different rates of CGT that applies. Selling no property related assets attract a lower rate of tax. Basic rate taxpayers will pay 10% compared to 20% for high rate taxpayers.
Those that sell residential buy to let properties will pay a higher rate of CGT. 18% will be charged to basic rate taxpayers and 28% CGT charged to high rate taxpayers.
There are many ways in which you can reduce or avoid CGT and it is always best for you to speak with your accountant before you finally sell an asset.
Transcript from a previous episode
so hello good evening everyone sorry i just looked at the wrong area here uh welcome my name is simon mischevich and my name is louise mischevich and tonight we are from optimized accountants as we always are to be honest but we are answering your questions about tax in relation to not just property but also business as well so whilst we um whilst i’ll just do a few technical stuff why don’t you give an appraisal of the kind of things that you have seen questions from clients existing clients when you’re doing their tax returns oh okay so um well self-assessment tax season is looming um delighted that quite a high proportion of our clients have got their data in already thank you everybody you’ve done an absolutely sterling job so far if you’re watching and you’re one of our clients and has done so already and if you haven’t got your data in get it in we can’t wait to work on it with you and find ways to save your tax um so some of the things that we’re seeing at the moment with regards to self-assessment is all to do with capital gains tax and the fact that uh this will be the second time that we will be reporting capital gains tax for an individual for the same property sale what’s going on there well that’s because of course the new capital gains tax regime is in and i think i’ve seen some questions already on there um so unfortunately now you have to file a capital gains tax specific return within a certain number of days but i’m not going to say don’t give too much away there louise don’t give too much away but then subsequent to that you also have to report it again in your own personal tax return so that’s something we’re seeing as a common theme in this last i would say month in particular um the other thing that i’m seeing as a common theme is self-employment and the grants that everybody has secured from hmrc in the last year or from government i should say and making sure that people know how to record those properly in their personal tax chance because if it’s a grant and not a loan then you have to capture it and again there’s some very specific things you have to do boxes you have to tick and information you have to include in that tax return so those are probably the two big themes i’m seeing at the moment and for anyone watching tonight obviously this is a youtube live session so please do i’ve got my chat box waiting for your questions so if you are watching us and you want to get your tax question answered then feel free to pose those questions to myself bring them in we want them uh so i will be looking to my left i’m just wondering why i put more water of course we’re in marbella and we’re setting up a temporary uh studio as you probably can tell but i have very little room to actually move my things around so i’ve got this bottle of water now just circulating i’m not cristiano ronaldo i’m not going to move my bottle of you know full fat coke out of the way just to show you that i’m only drinking water i know you’ve got to have you yeah far better than the message uh that’s a contentious issue isn’t it oh gosh who’s best um so what i thought it would do that is it’s basically uh get your questions on answered um i’ve got a couple of them so i will be looking to my left so uh let’s start the questions then so um amstel uh i hope i’m saying this correctly as uh he says um i own buy to that property in my soul name which a lot of people do still i mean it’s you know i know people talk about limited companies is the only way the only way to essex or is that a different program not sure but my my wife currently does not work uh which is really interesting from a tax angle i was told by a firm that doing a daily trust or deal of assignment uh can help me assign half of my rental income to her mr trick i think um turning to yoda by by mistake there uh this would make us more tax efficient as a higher rate taxpayer the rental income gets paid into a bank account is it true would hmrc object to this arrangement well actually ourselves accountant said 50 percent go on louise i’d go 99 quite frankly um as long as that isn’t going to push her into a new tax bracket i’m guessing from what you’re saying if she’s not working perhaps there’s not a large amount of income flowing to her name already or certainly if you were to look at 99 of the rental property profits if they fall below the basic rate tax bracket which of course is that magic 50 000. i know it’s slightly different from that number but just rounding it to keep it simple um if you were to give her 99 of that profit every year and it kept her below the 50 oh sorry 50 000 pounds allowance then actually if you’re already above that then that’s the bigger opportunity and the bigger win i would say but there’s as always with these things you’ve got some you know serious paperwork to get done um and you’ve got to follow due process as well so go take some really strong guidance on how to do that but that’s a great way and one of the ways that we love to maneuver um tax minimization strategies very quickly for our clients yeah i mean it’s interesting isn’t it in terms of the whole thing about can i transfer income from my assets to someone else and one thing that i had a question with hmrc a long time ago was if i wanted income from a bank account to be transferred to a lower base a basic rate taxpayer sort of a higher tax payer as an example even hmrc said well if you change the bank account details so it’s in that person’s name and the money goes into their bank account into the form of interest or dividends then there’s no argument that is their asset so why shouldn’t they enjoy the spoils as it were and therefore get a fairer tax treatment yeah and that came from hmrc so you know anyone coming in whose accountant is a bit worried about that then that came from the horse’s mouth i’m not sure you could say they just begin with an h maybe that’s what hmrc stands for awesome i’m getting bad again five minutes in here
i’m not sure if you picked up on mortgages what’s what things do people need to worry about when it comes to mortgages and lending perspectives well this is why i said due process so after we’re making some huge assumptions here that there might be a mortgage on the asset um and for those listening in thinking about doing this as well jumping on this idea if you have a mortgage in place it’s really really important that the responsibility for the debt does not maneuver and move round with the movement of ownership of the asset and the reason for that is because it can trigger stamp duty land tax so the person taking on the new debt if we can call it that if it hits a trigger point for stamp duty land tax then unfortunately you could find yourself on the the short arm of the stlt form and the tax due which is not ideal and one thing that i will say and again it’s all about due process and really exploring it for you and your particular situation afsal you’ve already said it’s your spouse your wife um the good news is when you move assets between a husband and wife it’s about the only wedding present you get from hmrc um but you can move assets without triggering capital gains tax sadly not the same scenario if it isn’t spouses transferring assets between themselves for example if it’s an undermarried couple uh or it’s a mum to daughter or son to um father anything like that sadly not only is it going to potentially trigger santa did you land tax if you have to move the debt around it’s also going to trigger capital gains taxes so deeds of trust are a fantastic tool in your toolbox but only for certain situations for certain groups of people i’m afraid um one of the things that on that point is down due to land tax uh typically people talk about stamp duty land taxes a tax charge when you’re moving property from one prop from one person to another there’s also the three percent sdlt and the three percent sdlc i think we need to remind ourselves i’m holding my hands up like in my tyrannosaurus rex about to pounce that’s not true i’m just uh leaning over this glass table not to try and make a mess of it um but the 33 sdlt high rate really applies for when you’re buying a property um i don’t really often see it when you are moving properties from one spouse to another and there’s legislation about that actually hmrc even themselves have brought in about two or three examples yeah whereby if you do a dress there’s no three percent sdrt but we’re saying countless number of solicitors and not having any pop-up solicitors but they are costing you thousands of pounds in errors of just assumption that they should charge you three percent but they shouldn’t should they no they shouldn’t uh the three percent doesn’t apply and it’s categorically confirmed as it doesn’t apply in the legislation to scenarios where you are moving assets simply between spouses which is a real shame here folks yeah and we we see a lot not just our own clients but we see it’s often in terms of people making paid for tax calls to us to say look how do we stop this because my solicitors are not listening um um we typically say look you know as you have to remember that like accountants in different firms or solicitors they use juniors so they are i don’t want to sound very negative but sometimes they can be a bit box ticking and as a result of that they they don’t understand the form so they’re trying to apply the three percent sdlt heart rate by not really asking great questions so i think you know you do need to challenge them on that or better still just use a solicitor who is a property tax specialist and you can it’s kind of perversely because a convincing solicitor is a property uh lawyer really solicitor but not everybody does the kinds of things that perhaps our clients are doing and perhaps you’re doing we saved a client on a paid one-off tax call we saved them over fifteen thousand pounds this week just because of that one issue the soliciting question had wrongly assessed that the three percent was due it was not we were able to point out the legislation fifteen thousand pounds saved immediately yeah and that’s really unfortunate because i think it puts the client really under pressure um this was a one-off call as louise mentioned and they they paid for our time but did they really need to pay for our time to get that answer when the solicitor should really have answered that i’m not sure
if we’re giving people like yourselves the comfort that actually the process they’re following is correct and they’re getting every single tax saving they can that’s on the table ready for them fantastic if we can do that for you we’d love to yeah absolutely totally true uh peter johnson so if you’re what you think hi peter our page says i own two ten properties in my own name i also own a limited company that owns four which again is a standard thing that we’re seeing more and more that people see in their own names i wish to close the company down via members voluntary liquidation interesting um i would sell two of the properties transfer to buyer ex specie dividend well we’ll talk about that in a minute and then the insolvency practitioner would keep enough cash in the company to pay the corporation tax um on the capital gain my accountant says council so though says this is a small chance it would be um targeted by the anti-avoidance uh rules brought out in 2016 um as it still will be a letting property uh he said there are rules were not designed to catch me but they um they could do so basically um and interesting enough what we do we do an awful lot of learning ourselves um and i remember this we’re part of the charter students to choose taxation as well as the chartered accountancy as well board and both do very good events cio team mall or the charter institute taxation and there’s one particular event uh where they talked about this very thing i don’t know if you recall uh is whereby he said that any uh distribution via capital of the shareholding where the company either buys your shares off you or liquidates in a certain fashion to use this phrase which is their species dividend will be seen as a distribution not as a capital distribution uh and hmrc have indeed i’m not sure the year so this 2016 may be more information than i even know um but i certainly know that um the person that we was watching pretty much said don’t try this at home kids um you will get caught out what is your favorite it’s basically targeted anti-audience rules so something called tar and it’s also referred to as well as anti-phoenixing so what it is is hmrc are saying if you close down a company and within two years do something same or similar uh in a either different company or in your personal name then they will classify the prior closure of the limited company as exactly as simon said it is not a capital gain instead it’s considered income now what’s the real difference it’s cash in your pocket you’re going to get taxed if it’s taxed under capital gains tax it’s likely to be taxed either 10 or 20 depending upon whether you can benefit from a really fantastic relief called business asset disposal relief and that drops it to 10 otherwise it’s likely to be 20 conversely if it’s classified as income which this piece of legislation focuses on kiss goodbye to up to 45 percent of that money as tax now which one would you prefer to pay 10 or 45 percent there is a couple of things that that was that was interesting on that point because i think what peter was saying was that he’s looking to close down the company and if we break this down um if you’ve got properties that you have sold which is then got capital gains tax and then you want to transfer over to be honest this dividend species may be caught out by in contextuals anyway if you are closing it down and you have got money left in the bank account then you would close it down and as louis said you would have this you wouldn’t get better because bada is related to trade companies and if yours is property investment then you’re not going to get this business asset disposal relief anyone listening in thinking what the hell are they talk about bada for bada was um is a replacement to entrepreneurs relief so if we just mention entrepreneurs relief because most people will relate to that uh but maybe not better albeit bad it does sound a bit more interesting it’s it’s a more appropriate definition that’s for sure yeah it is it is um so i think in terms of the whole closing down in the company you can certainly do what you talked about whereby you’ve got money left over in the company the company sells the assets and then transfers the money but it’s not a dividend it’s just a distribution of your capital because you’ve sold your shares back to the company and then the company closes down but the one thing i would say about all of that is if your cash left in the company is more than 25 000 pounds then you’ll have to go through an insolvency practitioner um and they’re not just what peter’s talking about anyways and he’s talking about a voluntary liquidation yeah slightly involve a practitioner but the thing is they’re not cheap um so a practitioner of insolvency is a very niche industry so you could be paying i the last time i got equate not for myself but someone else was 14 000 pounds and that was for a very basic similar to peaches scenario so do be careful when we’re talking about liquidations and you’ve got lots of money in there because one of the ways around that and it’s something that we advise our clients is just to take your dividends out and then when it’s less than 25 000 pounds then close the company um so you might have to keep your company open for a couple of years more but is it worth it well and this is the question i think peter you might want to just ask yourself if you were to trickle feed the money out of the company in the form of perhaps salary and dividends over time then um you know literally waste away the money uh carefully taken with tax efficiency in mind into your personal name rather than go through a members voluntary liquidation i wonder whether that might work better for you and might give you more tax savings we’ve looked at this now multiple times for clients it’s a very rare beast that actually works out better value for money for them to go through if you like a practitioner to help them close down that company and it’s much better to as i say my phraseology trickle feed the money out as carefully as you can with tax efficiency in mind until there’s nothing left and then close the company well before we kind of get into detail because peach is online so peter hey peter excellent and for anyone listening again if anyone’s thinking hey are you faking this is this really live uh it really is because peter’s just answered answering those questions um so he’s basically said four flats in that company ten flats are in my name uh name nome it’s in my gnome it’s in the garden he’s stealing my properties uh here it goes again uh ten flats in my own name i wish to enter mvl which i think we’ve covered off now um but then he says thank you for replying my accountant said one thing is to change the trade of the company to say holiday lettings no uh if it’s if it’s being investment all the way through then trying to change it just to get some sort of tax release that’s a definitely no no um find yourself kicked in the foot as well if if that message gets out and you’re in a location that doesn’t allow holiday let’s london uh then you could find yourself on the big end of a very painful fine yeah interesting enough pete’s been quoted 5 000 pounds i i think that’s pretty cheap to be honest that you when you saw that price you probably thought that was expensive um rest assured it’s not um but yes it is the cheapest just be careful with cheap i see this a lot um you know so this is a one question but if you use someone pretty cheap how good is their quality service and actually what guarantees do they give it’s right as well like really what you’re doing here make sure that you check out their qualifications credentials their experiences check them on google reviews do all that kind of due diligence of live organizations that are capable of doing so i’m sure you’ve already checked all of that what simon and i have found over time and i’m very mindful we’re jumping on the phrase cheapest so peter this might not be the case for you but sometimes what we find is the individuals who present the cheapest price actually don’t tell you about all the add-ons and then subsequently when you’ve worked out all the additional add-ons at the end of the process it’s more expensive than the more expensive one that you kind of said no no it’s too expensive so i’m sure we’re telling you stuff you already know um but just thought we’d share that as well yeah no it’s absolutely worth it and thanks for being online and being able to talk to the band yeah it’s great always helpful i think you when you’ve got questions you throw them out there you can watch this obviously in due course but sometimes it sees it when you’re online uh pradeep uh d-pan i should get that right okay yeah uh it says will there be any standard when the property is transferred from an individual to a limited company interesting uh if there’s any outstanding mortgages um also if someone is having several properties can they transfer it into a limited company and claim incorporation relief now that’s two big subjects okay so let’s just talk about uh transferring one property and let’s imagine there is there’s one part let’s imagine transferring two properties one of them is uh below five two thousand and one is above five hundred thousand because there are special tax no you’re not thinking about this so the first one um is this standard um so let’s imagine it’s 400 thousand pounds what’s that due to the land tax would you pay by moving it to a limited company well you’re going to pay the normal i think normal i wish it wasn’t the normal stamp ditty land tax breaks that all of us pay when we buy say a home but you’re also going to pay the higher rate which is the 3 and unfortunately if any member of the limited company is classified as foreign and i’m not going to jump into the detail of what foreign actually means then you might find yourself on the sharp end of an additional two percent so you just need to be careful when you’re looking at moving an asset because of course stamp duty land taxes payable within 14 days post completion so you haven’t got a lot of time to amass the cash and if you haven’t realized how much cash you need you could be in a little bit of hot water to say the least i think there is one question just to come back to is is stamp duty land tax payable typically if you look at hmrc’s website they’ve got a fantastic section on this and they describe that if what you’re getting in recompense is the shares in the company then that is consideration money’s worth and that is what the stamp duty land tax will be based on so i’m afraid simply gifting an asset to a limited company in which you obviously have the shares you’re not going to get out of the staff did you land tax sadly and there is also an aspect of the 500 thousand pounds in terms of if you’re buying it to to reside in as opposed to is that what you mean well here talk about the 8 so well just i’m just thinking about the 500 000 pound chart so i’m just going to read this out from hmrc’s material here so if a property is over 500 000 pounds uh hmrc quite rightly and i just want to do this word for word because i think it’s it’s we’ve got to be careful when we talk about online uh and it’s live one word could mean so something completely different but it says here stand duty land tax is charged at 15 on residential properties costing more than five hundred thousand pounds and we had a client funnily enough who bought a property lived in the property and wasn’t aware that you’d have to pay 15 so um you do need to be careful full on this uh it might not be applicable to you but i think people listening into this it might be um so finishing off it says here uh bought by a certain corporate bodies or a non-natural person’s whatever that means basically it does say these include companies partnerships including partnerships collective uh investment schemes and there’s some things that ated which we’re not going to go to too much detail now but one thing it does say is that the 15 does not apply to the property above the 500 000 pounds uh by a company that is acting as a trustee or settlement or bought by a company which is then used for and it’s got a list here so if you can picture the bullet point in your mind that bit useful a property rental business a property developers trader property made available to the public interesting uh financial institutions acquiring property in the course of lending and a couple of other things including farm houses what the interesting thing is here it is very much specifically looking at people buying a home in a limited company which they then live in so that’s what the 15 sdrt challenge is all about so i don’t think it’s necessarily to your kind of question but i think it’s worth advising on that because we had a client who bought property into a limited company didn’t say what it was used for just said i’m buying a property uh in a limited company and then moved in and then there’s stuff the convincing solicitor said well actually i’m gonna charge you 15 and they weren’t aware of it at all but we weren’t even aware that i was going to live in it um so really interesting um about how that came about but you do need to be a bit careful with that you do um let’s talk about incorporation relations oh my goodness again we’re getting some really great questions again
um you know we we kind of talk about this process whereby people talk about using smart companies and we work with property 118 mark alexander hey if you’re listening uh they do a fabulous job of moving people that need a limited company in a company structure they do all these kind of incorporations we work with them to do that um but the one thing i would say is that you can get so many releases like cgt stuff due to land tax sometimes your land tax is a mitigation uh through the incorporation release so you certainly can get that but what i want to bring people’s attention to and it’s it’s tripped a few people up actually is coming together tax um we did some internal training about this um uh to say well what really does happen so if you’ve got a market value of your properties let’s say it’s a million pounds and then you uh and it was originally purchased for five 000 pounds so monkey valley compared to the original purchase price is 500 000 pounds ordinarily if you sold those properties you would have a capital gains tax on that 500 000 pounds but because you’re using this incorporation relief then it’s deferring cgt please do know that word defer it’s not mitigation it’s deferral so that 500 000 pounds gain will crystallize if you eventually sell the company on and i think some people aren’t aware of that because i think they’re saying well i want to incorporate get all the benefits and then you know ditch the company in a few years time and if that’s the case then it’s not really right for you so i would say before you go on on the merry-go-round of incorporation of your properties ask yourself the kind of key question is is it really right for me um should i do it um given that there could be extra finance costs there could be accountancy fees there’ll be other professional fees as well conveyancing to sleep the fees as well and then will you do it if if it’s really right for you anyway because we do see people that it would say incorporation is right for them and then they they’re told it’s thirty thousand pounds and thinking oh i don’t be paying thirty thousand pounds grumbling about it which i appreciate is a lot of money but if it’s saving you a hundred thousand pounds i do see people kind of sit on the fence and then don’t do anything for five years then totally regret it
the one thing i was going to add actually is there’s a very nasty twist in the tail and it’s called latent gain and i’m not going to go into a lot of detail on this because otherwise i mean we could be here all night on this topic it’s such a great one um but there is a scenario where even though you are mitigating and delaying certain taxes like capital gains tax and stamp duty land tax if you’re able to follow incorporation relief if you happen to have a sizable amount of debt against the portfolio and that debt now exceeds the original purchase price of the assets when you first bought them whoa betide you doing incorporation relief because you’re going to be on the sharp end of a capital gains tax bill immediately on incorporation maybe not for all of the value but the moment your debt is bigger than the original purchase price of your portfolio when you add it all together i’m afraid you’re going to still pick up capital gains tax pretty much immediately to incorporation and that can put people off sadly i’ve come across a couple of scenarios where not necessary for one eight um but i’ve come across a couple of scenarios where clients were completely unaware of that and had massive massive capital gains tax bills that we were just able to stop before they’d taken that one step that would have been too far to backtrack from so just be mindful it doesn’t necessarily resolve well i do want to bring that to life um because we had a situation similar to what you’ve just said whereby they uh and i’m going to create a video of this a short video this of why the buy reverb refinance strategy can harm your incorporation um let’s go for an example here but imagine that you bought bought a property for a hundred thousand pounds you did it up and then it’s now worth 200 000 and you remortgage it at 150 000. well when you come to incorporation you you like louise says you stung yourself because the the difference between the 150 000 mortgage which you refinanced and the hundred thousand pounds purchase price of the original property um well that is going to be costing you a latent gain so you could have a 28 tax bill on that fifty thousand pounds and if that’s you’re being your strategy and i know on youtube it’s very popular about buy refurb refinance there’s so many people i mean even uh kevin wright who’s such a good great guy yeah he talks about it as well and it’s a good strategy but it can sting you when it comes to incorporation because you’ve now got this huge latent game which no one it talks about so it’s often yes you can get the all these reliefs the incorporation relief a cgt which again is deferral not mitigation you get the mitigation of stunted land tax but bang you’ve got the capital gains tax late in gain and we’ve had a couple of clients who just said well how do we finance that because it’s a personal gain which you personally have to pay for it you’ve moved all your properties to a limited company your company can refinance it but then well how do you get the money out you’re going to have to extract that so the buy refurb refinance strategy for incorporation which i will create a video for that isn’t always the best thing and isn’t it always the case there are so many fantastic property strategies out there some of them naturally go together beautifully some of them do not um um pradipan uh has said i’ll said the word your name correctly this time but pradipan has asked about the interest and said can hmrc challenge it um interesting enough on the deed of trust um and i might have to cobble this together in terms of the video creating a short video maybe for this but it is a fair challenge because if you if you’ve got a property that is either 100 yours or 50 50 uh between you and your wife and now you’re moving it to someone else albeit i gave this example earlier that hmrc themselves told me if you’ve got some assets then to split that into that person’s name and then that be fair because it’s representation but when it comes to property it’s a little bit more contentious so what i have to say is well if you’ve got someone that is earning 99 of the property income then the duty trust will must state that the property income goes there so does the capital which is something that people really aren’t aware of they just think it’s the income but it’s actually the beneficiary interest of the property which means capital as well as income so you do need to bear that in mind and then people’s thinking oh what does forget divorced i’ll let you think about that one through um but i in terms of that i think you need to demonstrate that it’s it’s it’s in the person’s bank account so wrong it go into a joint bank account often say to people if it’s if it’s predominantly going to one person in a marriage situation maybe it’s worth setting up a separate bank account and then they spend the money as they want and then hmrc haven’t really got a problem with that and again to be honest um a lot of my tax tips aren’t mine they are because i have sensible conversations with hmrc to say what do we do and how do we safeguard it from an investigation and they can be very very useful and so hopefully that’s useful anything to add onto that the only thing i just noticed is um can the form 17 be used by any joint tenants or does it have to be a married couple so the form 17 is a document that allows you to tell hmrc about a change in ownership of the underlying asset as well as then the income it’s used in particular scenarios so it’s not specific to let’s say a spousal relationship it’s more specific to how the asset was first owned and how it’s now changing ownership so don’t get caught up in it needing to be a spouse or document the form of 17 is more while we’re changing the ownership from what was 50 50 to something different and that’s how you use it and that’s when you use it to tell hmrc and it’s a very tight time scale as well to tell them so you have to do it within 60 calendar days of the executed deed that you’re using or the assignment document yeah so that brings me to an interesting one because we had another pay for client call who did adidas trust and they said my accountant’s not allocating the income um in accordance to this deed trust and i thought well that’s interesting would tell me more about it and this deal of trust was done in years unlike 2000 um but they didn’t do it so the proxy was 50 50 and if you do it 50 50 you have to do this form 17 which is a just a document that goes to hmrc to say we’re doing something a split of income that is not going to be 50 50. it’s going to be 99.1 as an example but they didn’t do it they just did the deal of trust they didn’t do the formula 17. so they didn’t notify and unfortunately because nil and void because hmrc will say look you’ve not notified us within 60 days therefore we won’t allow it they went back date yeah i went back just an interesting point about this um louise a pop quiz uh for tonight because you know it’s interesting to do that uh what’s a property when it’s owned 50 50 called well you have tenants in common yes you do and you have joint tenants right so tenants in common and joint tenants joint tenants is where you have approximately 50 50. now if you have a will um well actually it doesn’t matter if you will a joint tenant is where you own it 50 50. um and if one partner dies it naturally goes to the other partner um but what was really interesting we did a deal trust and what happens with that it comes tenants in common so tenants in common really important factor here why because it doesn’t naturally go to the other spouse so if you die you own 99 property or one percent and you hope it goes to your spouse it doesn’t naturally do that actually in law it basically reverts back to the will and guess what this particular person didn’t have a will so it’s really important if you’re doing anything like this is to make sure that your will is up to date and you add your property like this to your will i i bang on about checking your will once every 18 months to make sure it’s still complying with everything that is a your wishes and be your current asset base because things can change quite dramatically in 18 months um so sorry i’m getting on my high horse again if it’s been 18 months or longer since you last looked at your will you look at your will yeah so it’s so interesting i think just anyone listening in tim bishop who does a lot of the legal stuff as well as natalie as well from gal darts uh both of them would say that you need to regularly update your will when have you whenever uh you have a life-changing event marriage children divorce moving country that kind of thing should trigger you to think about getting a will so just as a bit of a nip it in the bud there um we’re already halfway you know yeah it can’t be halfway already it’s amazing how how quick these kind of events i always think there’s not enough questions and yet here we are um so if you do have any questions make sure you fire them in because the reason i are absolutely delighted to pick them up i just do it’s kind of um buzz in here as well uh luis is going to be driving one of our own live events i’m going to be here just for the technical and i’ll chip in as uh on certain stuff because he can’t keep quiet i can’t keep quiet i love the sign of my own voice and so but louise wants to talk about self-assessment tax returns and anyone who’s looking to do a self-assessment tax return you might want to do it yourself that’s fair enough but you still might have questions about how to submit it or you might have the questions about some element of your tax return and louise it’s really it’s going to be her show so that would be really interesting looking forward to that i love self-assessments well i don’t love self-assessments because i don’t like having my clients pay tax but i love self-assessments because there’s so many opportunities to save tax um and i’m not even going to pull you to death with how many thousand tax returns i’ve personally filed um but there’s a lot of opportunities for the self-assessment so i’m going to be running some sessions on that because i think it will be hugely advantageous and if you’d be interested in that well stick around and find out when we’re going to do the first one yeah well hopefully those are all gone live as well throughout me social very social media but just check out our website www.optimize accounts go to our live um seminars and you’ll see it there so make sure there’s a couple of them coming up next week as well um moving on m howard has asked a question do i need to keep a separate bank account for my property business yeah interesting lovely questions why don’t you take the the one buying description well for me the answer is absolutely categorically positively yes have a separate bank account because you should be keeping receipts and documents to do with that business for approximately anything to do with property business for approximately seven years after the tax year ends there’s a slightly different number that you’re supposed to keep it for i say seven because it’s easy to remember and that way you’re never gonna fall foul of not having the right documentation if you’re running it in a bank account that’s clouded and um busy with lots of other types of income might be self-employment income might be salaried money coming through the door might be a whole host of other things then if you do need to do a review of that or rather hmrc require you to do a review of that it’s going to be really hard to keep it very clean and very easy to make sure that there are strong auditable connections with the income and expenses flowing from that bank account specific to your property business i also think it demonstrates a real commitment to the business and i absolutely get it sometimes we all start up a business or an activity very entrepreneurially and we work with what we have with the materials we have to hand and that sometimes means using a bank account but as fast as you can separate out your bank account for your business and each separate business and i’m saying business not property each separate business should have its own bank account so for example if you’re running furnished holiday let’s meeting help sheet 253 conditions won’t boy with that tonight have that completely independent of the bank account running your residential properties that don’t meet help sheet 253 conditions keep things in separate silos because it will really help you i’m off my bandwagon sorry i’m getting on it tonight it’s an interesting one because i always say to people when people say should i use a business bank account or a personal and back to your point of hmrc investigations they can open up all sorts of questions about your personal transactions and you don’t want that but the big thing for me is if um if you’ve got a business banking out and it’s constantly growing louise let’s pose that question because i think it’s easier to do it this way if if a bank account is growing are you making money or are you making a loss i would say you’re making money and that’s because because if there’s more money in the bank account at the end of every month that would and the only thing in there is your property business well that’s got to either mean one of two things either you’re not paying you do um or you genuinely are making more money every month yeah so i think these are natural things for you to kind of think about that um for sure so um so that’s a great question david teams has said if you have a limited company sorry if a limited company has losses can you still take dividends wonderful question so great question david i think in terms of a limited company can only distribute dividends if it has retained profits which means that the income must be greater than the cost and therefore you’ve got profit to distribute to the shareholders otherwise it’s a loan because you’re you’re you might have to fund it somewhere and to give the money back to you which it can’t be a distribution of it of income it has to be some other form of distribution uh it could be seen as income of wages i mean it is possible to take wages out of a loss-making company and get funding from a bank to fund those wages i wouldn’t recommend it i mean if you if your business is struggling why would you make it worse can i add to that though yeah please do um because i’m looking at it from a slightly different angle david so forgive me if i’m going completely off where you’re coming from if you’ve made a loss in the most recent year but actually when you look at all of the retained profits you made in priors that you’ve not yet taken out and when you net that loss against those profits if you’ve still made a profit you can still take a dividend if however your losses far outweigh all of the retained profits that you’ve got in your business i’m afraid there isn’t an ability to take a dividend very true top level top level there’s a lot more detail we could jump into because there are a couple of scenarios where you could take a dividend we only just talked about them this week funnily enough with the tax team um but they’re not they’re not cast iron and my concern is that hmrc sometimes jumps all over them and can pull them apart but that’s broadly how it works no great answer great answer nothing to add there uh h a has said uh what’s happened to a property that has been placed into a trust for a child that’s a huge question doesn’t it oh what a fantastic question that’s like an example i mean where do you start that yeah it is like an exam question i think where do you start because i think a prop why is a pro what why is a potty trust what kind of trust yeah badgers discretion trust in possessions child trust yeah it’s not an easy one to answer i think yes to be honest i i think in terms of hey if you’re watching into this is because it can this subject can easily go on to lots of areas i think if you come on the show next time around maybe ask a real specific question if you want to i appreciate it might be a bit sensitive but it can really have an impact on what an amazing um topic trusts on their own right i mean i think we could run an entire series on trusts um you know for those in the know the duke of devonshire the late duke of devonshire pretty much passed on something like 18 billion pounds worth of assets a few years ago to the new duke of devonshire and paid not one jot of inheritance tax courtesy in the main from trusts and using trusts very carefully they were a fantastic tax saving tool up until about 1992 and then the laws changed a little and made it much more expensive but in certain circumstances it’s still a fantastic tool in your toolbox um i’m going to go to the youtube live if you are watching on youtube live linkedin or anything like that please do get your questions in to us we want to take those questions absolutely it makes our show a lot more interesting for us and it’s going to give you benefits so why not ask that question get it asked asking um matthews herbert as asked a question i’m kind of treading on eggshells here class m1 building um is class m1 building class likely to come to scotland uh not fair england can do conversions forgive me because i’m not up on my building class terminology is this to do with the permitted development rights to um changing office blocks to residential is that what you mean um simon’s now googling because i don’t understand it um in one class building that’s just a building motorcycle licenses i don’t think that’s right yeah it’s definitely not motorcycle is it um and there’s nothing on there so i guess we don’t know it’s even m1 it’s got low emissions
i don’t i don’t think we’re on for that so sorry i’m so sorry about that if you can come back to the show next time and give us a specific on that one in fact you are obviously on youtube live so maybe give us a bit of an example yeah if you’re still here with us all right let’s tell us more did i get that right was it to do with the it probably wasn’t yeah to do with the office it’d be quite funny if it was totally not yeah obviously with emissions um okay so uh kishore a has said hi could a foreign investor interesting i love that when i’m doing it we’re doing an awful lot of international tax planning yeah and i’m like this is my soapbox now oh gosh yeah it’s myself we’ll be here for about 10 minutes though with simon so we talk about international tax planning and when you go to a uk accountant what they basically mean is you’re a foreigner so i’m going to tell you everything to do with uk tax okay then you go to america and you say well okay i need to know international tax and that cpa will just tell you everything about american tax and you kind of think well hold on are you giving me transatlantic tax you give me international tax advice no they’re not they just see you they say it’s international tax what they mean is you’re coming from a foreign country into our country so we’ll still tell you about all of the taxes in our country so true so annoying okay so just be careful of that because whatever you do in one country and move to a different country you’ve got not just to be tax efficient in the country you’re leaving you’ve got to be tax efficient in the country you’re going to you’ve also got to be tax efficient across the waters and if that sounds quite difficult to get your hand around it is but it’s so important for you to understand true tax treaties across two countries and where you could trip up i mean you know i’m smiling but with pain in my eyes we’ve paid for this advice personally aren’t we so we know that and then we ended up telling them what their own tax regimes is it’s ridiculous yeah moving on moving on before he gets on his next soapbox they’re easy done uh so next one uh ourselves i said i own buy to let property in my own name so this is first come back what’s that what oh i’m sorry i’m sorry could a foreign investor buy a vital property in the uk do they get the 12 500 annual tax free income as uk residents when it is bought in a limited company and that’s an interesting one part of the international tax in the uk we’ve got something called the remittance basis which basically means that you say hmrc i want you just to text me on my uk income and if you say that to them you lose your personal ounce if you say to them actually do you know what you can text me on my worldwide income that’s all right you then get that twelve thousand five hundred percent allowance so sometimes it can work for you but it can also work against you and this is also assuming that you are resident in the uk if you’re not resident in the uk and you don’t fall within a certain criteria then you won’t get the uk personal income tax allowance of twelve and a half thousand pounds as it is currently so there’s a lot in that question kishore which i feel like we’re now going around slightly um but actually it’s a real big topic it does say uk resident know so i think we can only go on that basis so i think from that side of things you would do it’s really worth you thinking about a number of factors because after a while uh we had a client who i said well why don’t you just bugger off to portugal uh for inheritance taxes i’m thinking what’s going on i did uh youtube banned me now weren’t they but they probably don’t know what that word means um so i think from that side of things i i would say that you do need to get some tax advice around that uh simply because the country you’re leaving is you’re gonna have exit charges you’re gonna have entry charges in the uk and when you should do certain stuff word dictate on everything you do so make sure you have a conversation with someone uh youtube is great and i always say that with this kind of thing is this channel this the videos we put out there is here to give you what i would call the golden nuggets for you to speak to your advisors about okay it’s not the be-all and end-all it won’t give you the specifics but it will give you that something you don’t know what you don’t know hopefully these videos gives you that bit more to go away get some professional advice is all i’m going to say on that um we are coming to a close now that’s we’ve got 10 minutes we’re still at 10 minutes but we’ve got 10 minutes um help sierra leone that’s interesting uh phrase on the youtube catchment um but helps you alone leon says how can two people that are shareholders take different amounts of money from the linux company awesome question awesome question can they can they take different amounts of money i’m going to say no i know there’s only reason why um i’m going to just put it out there if you’ve got two directors that set up a limited company all by themselves on this paid peanuts get monkey sites called uh companies formation um by the way not having a dig at that company but it’s cheap and it you get a cheap product um but two people setting the limited company um who have 50 shares each what classification of shares will company formation give you well if you’re not careful and you don’t know what you’re doing you’ll end up with ordinary shares which all sounds fantastic but it’s quite extraordinary
yeah it’s your level i know oh that’s shocking um but unfortunately if you’re all in the same share class if i can only put my teeth in um then i’m afraid you can only take dividends in the proportion of shares that you own so if you have 50 50 shares you must take 50 50 dividends if one of you doesn’t wish to take dividends be very careful because that realistically means in most scenarios no one takes dividends so you’ve either got to both agree or you’ve both got well you’ve got to agree basically you either take them or you don’t take them and it’s both of you that has to take them i mean there is a way around it no is that yeah uh what what can you tell me about share for share exchange because you love those
what you do all day ah so if you happen to have two different share classes because you’ve got two different shareholders like an a share and a b share i know i’m really pushing the boat out on the names here i’m so sorry and they’re both still ordinary shares all of a sudden you’ve severed the link between the two of you needing to both take dividends or indeed both of you take the same dividends even if you both own 50 50 of the company
so if you are careful and think about your share structure before you set up your company then there is a great opportunity to take out different types of difference from one another that doesn’t take away the fact you have to go you both got to agree to it obviously but um um it’s a great opportunity to be more flexible and more forward thinking particularly around tax mitigation but also around taking back what’s due yeah you do need to be careful though because i’ve seen i’ve i’ve been partying of a conversation uh with someone whereby there’s two parties involved in the company they’re not married or espoused or anything like that um and what if we have this person take more dividends out because they’re basically rate taxpayer and i take less because i’m a heart rate experiment like it just sounds as though you’re the tax town wagon the the the business job the business body of the dog um it just didn’t make sense and i said well have you thought about what you’re talking about you you’re on about giving more of the money to the basic rate taxpayer just because they’re basically but you’re actually physically giving them cash are you happy with this and the the higher it takes to pay those that do you know what i’ve not thought of like that i’ve just been thinking that there’s a tax problem so you do need to be careful of solving a tax problem but causing yourself a financial problem because you’re thinking well i’ve just actually given my assets away to someone that we’re meant to be in business doing 50 50 on so you do have to be a bit careful i would say on that point but great question lovely question um i i’ve just noticed there’s a couple of questions about family investment companies i’m going to sway off that one i know that bob welton’s awesome sorry but and the reason for that is because i think we spoke about that we share structures and and to be honest to answer very quickly but a family investment company he knew he wasn’t going to be able to it’s just a shares with different share classes so you’ve got just people with shares so and that’s people happen to be related right and they might have a very specific shareholders agreement in place that explains what happens with their shares yeah so i don’t think i’m going to go too much into that what i do like because i’ve just read some of the other ones in terms of cgt i think we’ve already answered those but there is a great question and it does lead itself into everything we’re doing i think i know where you’re going so samantha said is it possible to be tax exiled first of all for anyone listening into this what does it mean to be tax exiled louise well it doesn’t mean you’re on the run that’s the first thing what it does mean though is that you have found yourself to be in a very unique position amongst very few people who quite frankly don’t really pay any or very much tax to any government or organization i’ll leave it like that yeah and the way you do that is to be i say non-resident in any country in any given year so it’s possible for you to do with this with typically i would say it’s easier to do with three countries but better we’re four or five countries if you can do it um so and who doesn’t want a country hop on that level of basis yeah yeah i know for you people who do it i’m not going to say their names because they probably don’t want us to share that information out but they do that and you know they go to different countries so it is possible to go to portugal spain france uk and america as an example and then have homes across those countries and then just say you know what all the income is mine not going to pay you any income tax because i’m not resident in those countries you do need to be bits careful though uh somehow where you generate an income it could be taxed there but you wouldn’t be taxed on your worldwide income which is where the pain can really come in so you’ve got investments then sometimes like the uk they will say well actually we want to do a withholding tax and then you uh you do tax return based on the income generality in that country so it’s not all plane sailing to be honest but you know if you’re getting a wage from your limited company per se then would you be taxed in any country i think there’s genuine good reasons of situation yourself in a tax outstand a tax efficient country or countries and not pay any tax so the question over to you guys is if you’re watching this channel would you check your your self-assessment tax returns i think that’s the best thing all your wage slips and say well actually how much tax do i pay and could i not utilize that money to make to have a a a renegade uh lifestyle which it means i’m i’m you know gonna be dusting myself around different countries and who’s that person who works at kkr and uh he lived on a boat so was it what a guy from kkr or bromwich oh probably a problem with it but but what you’ll hear stories that billionaires will have more slightly out of marijuana right you know 100 meters outside that’s uh not just tax jurisdiction but also that country’s jurisdiction just to avoid tax and but then why wouldn’t you do that so you want and basically uh what’s more interesting is that most countries would run on a nightly basis don’t they louise uh well in the uk you’re considered resident based on how many midnights you spend in the uk and the likes of america it’s not midnight it’s how many physical days you’ve been in the country so if you’ve only spent an hour in the country on a particular day because you happen to land there and move on that’s still classified as a not transit um no no on time in certain circumstances transit is completely ignored yeah so all these things and covered as well but it just be fun not a lot yeah but you know to end this show on can you be tax exiled can you pay zero percent income tax we are proud to say we’re not proud it’s not us but uh you know it’s not us bringing you a product like we’re selling uh yeah bang out um you know it’s not like that at all uh but it is entirely possible to live in different countries and not pay any income tax at all so perfect quite dreadful so that lends us to a to a close there are a couple of events that’s coming up um so next monday do we have anything i don’t think we do the 30 we have on the 26th so 26 funny enough if you’re from hong kong listening to this we do have our hk uk session coming up and that’s thursday the 26th of august at 3 30 p.m because we want to make sure we get the right time for hong kongers because they are far far more as than we are um and then it’s back to the project expert panel on the 6th of september so it’s anything a month and i’ve really missed it yeah it’s it’s been a bit of a loss for me and then we’re back to the self-assessment so louise’s first self-assessment show will be monday the 13th of september at 18 p.m lucky for some and then it’s back to us again on the uh the third wednesday i think it’s going to be fourth maybe uh when we do this this business again don’t miss us no so thank you ever so much for joining us tonight uh hope wherever you are you’re having a great time enjoying the weather if it is if it’s nice and ideally our tax exiled as well that would be fantastic please you know on a postcard write to us and tell us all about it pina colada and tax deficit how about that perfect amazing good night good night