Acquiring a property is often one of the most significant transactions that people and businesses undertake, but often the planning is focused on the legal issues, funding and practical things such as moving.
These are all crucial elements, but risk protection and tax planning is often a secondary thought or not at all.
For us this is unthinkable for an asset that will be significant in value and hopefully will grow overtime, so why would you not want to protect the wealth within it and your business or minimise the cost of it to you with tax savings?
Here’s a checklist of items your accountant should go through with you to ensure you consider every element and opportunity.
Stamp Duty Land Tax (SDLT)
SDLT is a complex and overlooked tax opportunity which can result in you paying more than you should. There are many exemptions and tax reliefs available which depending on your position these can be applied to reduce your bill, possibly to NIL!
Inheritance Tax
Planning will allow your family to enjoy your lifetime’s achievement whilst taking into account current and anticipated future needs. Working hard to build wealth to then see it reduce by 40% is a big frustration for many clients.
Business structure
The most common ownership structure is a single limited company that undertakes all the trading activities and owns all the assets, but is that right for you? When you are considering to change your business structure there are important commercial considerations such as the Bank’s attitude to the change, or tax considerations to avoid any surprises or take advantage of opportunities.
Wealth Management and Planning
Having a holistic view of your wealth including understanding how much you have and where it is coming from will help you to understand the impact of financial decisions on your short term and long term wealth and ultimately your retirement plans. It can uncover some important tissues and suitable options to help you build and protect your financial future.
Ownership and Wealth Protection
There are many different ways to acquire a property including via a trading company, an investment company, a holding company, an LLP, personally or in a pension. All have different pros and cons and the right choice will depend on various current factors and future plans.
Capital Allowances
Are you certain that you have claimed all of the capital allowances that you are entitled to or are maximising them? Many businesses think that they have, but often a proactive review will lead to additional allowances and reduction in tax liabilities.
Capital Gains
Whilst you may just accept you have to pay some tax as you are pleased with the growth in value, you may be doing so un-necessarily.
VAT
It is a common misconception that there is no VAT on property, but some commercial properties may have been ‘opted to tax’ so that there is VAT on the purchase price and VAT on any rents charged. This can have a big impact on cash flow and the profitability of some developments. New and Self build properties have complex VAT recovery rules that need to be understood to avoid nasty surprises.
Corporation Tax
If you own property via a company structure then any profits and gains will be taxed at 19%, which rises to 25% in 2023. Understanding what options you have to mitigate corporation tax bills will become more important as the rate rises.
Finance
Whilst there are specialists in finding the best funding deals, understanding what costs are tax deductible and when tax relief is available is key. A common mistake is to believe that mortgage repayments can be deducted from income to assess profits and tax bills, but the capital element of the repayments is not tax deductible.
Checklist complete!
It is impossible to cover all the key issues in any document as each individual and business will have unique issues for them.
So why not book a free no obligation meeting (face to face or virtual) with us and let’s explore your options.