Tax and Legal

The contents of this tax and legal page should not be considered an exhaustive guide to buying or leasing property or land as a real estate investment and therefore we would advise all clients to obtain professional advice in tax and legal matters before considering any purchase. There are many solicitors and tax specialists to choose from and many of our investments have solicitors in place to act on your behalf should you so wish to engage their services.

A solicitor is bound by the Law Society to advise in the client’s best interests and spend a large proportion of their time working on property matters. They will guide you through the legal process and raise the right questions. A solicitor will protect your wellbeing, ensuring no conflict of interests; they will also check the deeds and the contract.

Capital Gains Tax (GCT).

Capital Gains Tax is a tax on the gain or profit you make when you sell, give away or otherwise dispose of something. It applies to assets that you own, such as shares or property. There's a tax-free allowance and some additional reliefs that may reduce your Capital Gains Tax bill. Sometimes you may have no tax to pay.Most assets are liable to Capital Gains Tax when you sell or dispose of them - whether they're in the UK or overseas. However, some assets are exempt, such as your car, personal possessions disposed of for £6,000 or less and, usually, your main home.

You have an annual tax-free allowance for Capital Gains Tax known as the 'Annual Exempt Amount'. The Annual Exempt Amount for the tax years 2011-12 and 2012-13 is:

  • £10,600 for each individual
  • £5,300 for most trustees

If your overall gains for the tax year are above the Annual Exempt Amount, you’ll pay Capital Gains Tax on the excess. If your overall gains are below the Annual Exempt Amount, you won’t pay Capital Gains Tax.

Self Invested Personal Pension (SIPP).

A Self Invested Personal Pension enables you to choose where your pension funds are invested. You can choose Commercial Property or Land in the UK or Abroad. You can also indirectly invest in Residential Property throughout the world. Obviously your SIPP can also invest in pensions, cash funds, equities, unit trusts and all similar investments.

Whether you self invest or not, a SIPP is hugely flexible and you can chose how you take income when you retire. Contributions into a SIPP are fully tax deductible. This could mean tax relief of up to 40 per cent on contributions.

Entrepreneurs Relief

Entrepreneurs’ relief can reduce the capital gain on disposals of certain business assets, giving a 10% effective rate of tax on the first £1 million of lifetime gains.

A flat rate of Capital Gains Tax (CGT) of 18% was introduced from 6 April 2008 and at the same time many of the previous reliefs, such as taper relief, were removed. Under the previous regime, many people with full business asset taper relief would have had an effective CGT rate of 10%. Entrepreneurs’ relief (ER) was introduced from 6 April 2008 to provide an effective rate of tax of 10% on ‘qualifying business disposals’ by reducing the gain by 4/9ths. However, unlike taper relief, Entrepreneurs' Relief only applies to the first £1 million of lifetime gains.

In order to qualify for Entrepreneurs' Relief there must be a qualifying business disposal. The following are qualifying business disposals:

  • A material disposal of business assets
  • A disposal of trust business assets
  • A disposal associated with a relevant material disposal
For further information please check out HM Revenue & Customs and The Law Society websites.
Please note the content contained within this page is for information purposes only. We would advise all clients to use independent legal and tax specialists wherever possible. The information contained within this page is correct at time of publishing.
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