Welcome to the May 2005 Property Investment and Tax Newsletter
Property Investment and Tax Newsletter
Hi
Welcome to the May 2005 Property Investment and Tax Newsletter.
Well, I am sure you will all have heard by now that the government has finally decided to get tough (but not tough enough) on the so called get-rich-quick companies that have been fleecing property investors. Earlier this month the government used compulsory winding-up orders to close down FIVE companies.
It is so sad to hear that hundreds of investors lost between £30,000 and £50,000 with companies who promised that they could help build £million portfolios within 12 months.
But as the saying goes ‘if it sounds too good to be true, then it probably is’…especially if it involves departing with such huge amounts of you hard earned money.
This leads me nicely onto why *you* don’t need to throw your hard earned money after such scams. As we all know the UK property market has slowed right down and properties are sticking and not selling.
The number of motivated sellers is rapidly increasing and estate agencies are in large sat around twiddling their thumbs.
This all means one thing….it is definitely now a BUYUERS MARKET!
This means that *you* should be able to buy property at heavily discounted prices. The last deal I did was 30% below market value and it was not on a new-build either, so the discount was a very genuine one.
One of your key allies in buying below market value is the estate agent so this months investment article is called ‘7 Questions you should ask an estate agent?’. It is provided by an investor/entrepreneur who I have a very high regard for - Ranjan Bhattacharya.
So make sure you ask these before you even consider looking at a property. You could save yourself a lot of valuable time and money.
This month’s taxation article is based on the use of Personal Loans for your properties. We will examine the typical scenarios when you would use a loan and detail whether the interest relief can be offset.
As always Arthur, Ian and Daniel have answered your taxation queries in our Question & Answers section.
1. Property Investment Tip – 7 Questions you should ask an estate agent
2. New AFFORDABLE Tax Consultancy Service Launched
3. Tax Article – Interest relief on personal loans
4. We’re investing abroad, but don’t forget how Aleesha got herself into a right tax pickle!
5. The PROPERTY TAX gurus answer your questions!
Can I buy property for a child under the age of 18?
Can I offset rental losses against my partner’s income?
Is there CGT due on a property purchased for my mother?
Tax treatment for new and replacement kitchens
How do I handle the refurbishment costs I incurred?
6. International Property Taxation Q&A by Daniel Feingold
7. Feedback and Comments
1. Property Investment Tip – SEVEN questions to ask your estate agent
Love them or hate them, one thing’s for sure, property investors would be no-where without the help and support of the Estate Agent.
We all know the reputation Estate Agents have and although some of it may be unfair, there are good reasons not to just blindly go along with everything they tell you.
The Estate Agent is a deal maker. The reason for concern arises when the agent performs ‘tricks’ to get a deal through.
Although no one has any objection to a bit of enthusiasm and creativity in getting a deal through, the problem arises if these ‘tricks’ go against the interests of either buyer or seller.
It is important to remember that the Estate Agent is essentially working for the seller. After all it is the seller who pays their fees. However, a good Estate Agent has a duty to remain professional and ethical in his dealings with all parties throughout the selling process.
The question for a buyer is how to cut through all the Estate Agent waffle and get the true picture on a particular property deal. Over the last 15 years of buying and selling property, I have developed a set of 7 questions to ask an estate agent.
If you ask these questions, you will gain a greater insight into the deal, and obtain valuable information to help with your negotiating position.
1. Why is the owner selling?
If you are lucky, the estate agent may reveal more than he should about the sellers’ circumstances and motivation for selling. A motivated seller is more likely to accept an offer below the asking price.
2. How long has the property been on the market?
Has the property been ‘sticking’ on the market? Does this make the seller getting desperate to sell? Why is the property not selling? Are there any problems with the property that the Estate Agent is not disclosing?
3. When does the current owner/occupier need to move out? Is there an urgent deadline that could be an advantage in negotiating a lower price for the property? If the owner has to move somewhere else they will be keen to sell and get everything settled before they go.
If the property is tenanted and the tenancy is coming to an end, the seller will not want to keep the property empty for too long after the tenancy has ended.
4. What is the minimum price the seller will accept? Knowing the bottom price that the seller will accept will help you formulate your offer. If a property has been on the market a while, most Estate Agents will be very forthcoming with this information.
5. What do you think the property will actually sell for? This is a bit of a ‘fishing expedition’. What you are looking for is signs that the Estate Agent has a different opinion as to the true value of the property.
6. Who priced the property? Another ‘fishing’ question, following up from the last. If the seller priced the property and the Estate Agent thinks its to high, then when you place a lower offer, you stand a very good chance of having the agent bat your corner. If the Estate Agent has priced the property then they probably will stand by their valuation and push you to offer close to it.
7. What other homes are there in competition to this property? This is a very useful question provided you get an honest answer! The Estate Agent is looking to close a deal, not open everything wide open with a whole load of new options. You are likely to get an honest answer by taking the property details sheet into a rivals office and asking them! The information you gather will be important in justifying any offer you make.
… And finally.
These questions are very simple to ask. I am not suggesting you use these 7 questions like a script and ask them all one after another. The best way I have found is to engage the Estate Agent in conversation. During your conversation, make sure you cover all 7 questions in whichever order feels natural.
If you get answers to these questions you will be a lot more informed when you make your offer.
Ranjan provides 7 F’REE Property Investment Strategy Reports which cover:
Getting a Bargain at Auction
How to Outperform the Property Market
Successful Off-plan investing
Maximising your cash flow
Buying Snag-Free new build property
Five Tax Saving Strategies to Save you £££s
How to Profit in Today’s Market
To get access to these strategies please go to the following:
.......you have nothing to lose, but much to gain.
2. New Tax Consultancy Service Launched
We have just re-vamped our tax consultancy service section and made it even more affordable and packed it with greater value.
You always know that you are doing things right and that you have the top quality tax specialists associated with you when the testimonials keep flooding in!
Thank you.
We have now opened up the tax consultancy service for any UK and international tax matters (property or non-property related) and Arthur Weller and Daniel Feingold are heading this service up.
We don’t believe you can get better value for money, especially as our tax experts are regularly offering advice to fellow accountants and tax specialists across the country (and in some cases world-wide).
3. Tax Article – Interest relief on personal loans
In this months on-line tax we have addressed a question that we regularly get asked. We have provided some valuable information about obtaining interest relief when using personal loans for your property business.
In particular we will look at the tax implications when using personal loans for:
Providing Deposits
Refurbishment/Developments
Purchasing products i.e. furniture
Continuing the running of your business
Running an overdraft
To read the article on-line please go to the following:
4. Investing abroad? ....Don’t forget how Aleesha got herself into a major tax problem!
It is well known (and has been well documented) that more and more investors are now looking abroad to find the next big investment hotspots.
In December 2004 we wrote what proved to be an extremely popular article called: ‘The Capital Gains Tax Trap - The multi-millionaire property investor who couldn’t afford to sell a property.’
If you are following the overseas investment crowd and are using a re-mortgaging strategy to raise the necessary finance then this article will serve as reminder as to how you could end with major tax problems, just like our friend Aleesha!
So you would be well advised to know about potential problems before you hit them.
To read the article and learn about Aleesha’s tax problems go to the following link:
What better way to get fr’ee tax consultancy than through this newsletter?
Property tax experts Arthur Weller and Ian McTernan answer your questions.
Here are this months selected questions answered by Ian and Arthur.
Can I buy property for a child under the age of 18?
Question
We are considering buying a property, which will be let. Is there a way to buy this property for a child who is 13. Is it possible to put it in some form of trust for your child in order to decrease the tax burden. For example CGT tax etc.
Arthur Says
A minor under the age of 18 cannot own land or property in the UK, so it would have to be owned in trust by trustees, e.g. parents, for the beneficial ownership of the 13-year-old.
Any asset owned by a child under 18 and unmarried, derived from the property of the parents that produces income of more than £100 per year, is taxed on the parents as the parents income.
However this doesn't apply for CGT purposes.
One possible solution is to create a ‘bare’ trust. A ‘Bare’ trust can be created where that the child is the beneficial owner, and the parents are the legal owners who hold the property effectively as nominees. When the property is sold it will be taxed only on the child (who will have their own CGT annual exemption, and perhaps lower tax bands - if they don't have much other income) and not on the parents.
But it must be remembered that the child cannot be prevented from having the property put into his own legal ownership at age 18.
Can I offsetting rental losses against my partner’s income?
Question
My wife has a BTL property in her name, which returns £300 per month taxable gains after all expenses.
1) She is about to purchase a flat, which initially will make a monthly loss after expenses of £100. Can this £100 be offset against the £300 leaving a taxable balance of £200?
2) If as I suspect she can, would I also be able to take advantage of this situation if I was to purchase the flat in my name instead of hers?
Ian Says
Firstly, provided the flat is rented out on the same basis as the first one, then the profit and loss from both properties are added together to determine the overall rental profit, so the loss can be offset against the profit.
Secondly, if you purchase the property in your own name then you will have a loss of £100 per month and your wife will have a profit of £300. This means that you will end up having a loss to carry forward against future rental profits and your wife will incur tax on the £300.
This does not seem particularly sensible.
Dependent on your relative incomes, it may be advisable to hold both properties in joint names to utilise all your allowances.
-------------
Ian and Arthur have answered more of your questions on-line.
These include:
- Is there CGT due on a property purchased for my mother?
- Tax treatment for new and replacement kitchens?
- How do I handle the refurbishment costs I incurred?
You can read the answers to these and also the backlog of all our previously answered questions via the following link:
I welcome your comments, feedback and suggestions for the newsletter.
Also, if you would like to contribute to the newsletter i.e. share your experiences, ideas, tips etc with the newsletter subscribers then please email me at:
P.S Please feel fr’ee to distribute this email and send it to anybody who you feel will benefit from this tax saving strategy.
(C) 2003 Amer Siddiq & Tax Portal Limited
Disclaimer:
The design, format and contents, unless otherwise stated, are the property of Amer Siddiq & Tax Portal Limited.
Please note that this information is for general guidance only.
It is based upon our experiences, opinions and knowledge.
Amer Siddiq & Tax Portal Limited cannot be held responsible for any decisions made as a result of information here.
You are encouraged to seek taxation, legal and financial advice before making any investment decisions. Amer Siddiq & Tax Portal Limited are not responsible for the content or information in the sites of our affiliates and links.
With so many types of tax consultant choosing the right one may seem like a daunting task. Here are some useful tips for finding the most suitable accountant for your needs.
Financial Services Authority
Tax Consultants Guide advise people to only accept financial advice from an approved consultant. The Financial Services Authoriry are the primary regulatory body in the UK, ensuring that legal financial service providers in the UK adhere to it's standards
Inland Revenue Tax Calculators
Did you know that the Inland Revenue website has a range of useful tax calculators that can help you to get a good idea of the taxes that you will have to pay?
VAT Quick Guide
Apart from a few exceptions most goods or services have Value Added Tax (VAT) levied on them, VAT exceptions are services such as insurance, education and training loans. Tax Consultants quick guide will give you the basics.
The Budget 2005
Summary of the UK budget changes 2005.
Going Offshore
A while ago the option to go offshore was available only for the select few. Today many people are able to benefit from offshore and international business.
Capital Gains and Inheritance Tax
As more of the UK population potentially become liable for Capital Gains and Inheritance tax, professional financial planning and advice becomes ever more critical.
Tax Consultants Guide to Film Partnerships
If you have a significantly large income tax bill it may be worth seeking the advice of a tax consultant who specialises in film partnerships, an excellent investment vehicle that can be used to shelter your income for up to three years back...
Considering Tax Efficient Investments
The tax efficiency of any investment needs to be carefully analysed from your own personal point of view and circumstance. Not all investments that offer tax benefits and incentives will necessarily benefit you.
Small or Home Based Business Start-up Tips
Starting your own small or home based business is a daunting prospect but can afford you considerable satisfaction, not to mention personal and financial reward. The Tax Consultants Guide’s tips will set you on the right track to small business star
Pension or Property
Despite the tax relief benefits many people today are exchanging their traditional pension for property. Is investing in property a better way to save for your retirement ?
Ladies Listen Up - It's Time To Talk About Your Pensions (don't yawn!)
I know I know, talking about pensions is the fastest way to send anyone into a coma but seriously, it’s time for women to take charge of their retirement planning and get the deal they deserve
Tax and Financial Information
Tax Consultants Guide will enable you to keep informed about changes in taxation and other developments within the financial services industry.
Taxation & Financial Articles
Inside the Tax Consultants Guide you will find a range of tax and finance articles, some of the articles come directly from us and others are provided by tax and financial consultants who are experts in the financial services industry.
Tax Consultants
Tax Consultants Guide uses the generic term tax consultant when referring to any specialist consultant who is able to assist you with your taxes and reduce your taxation liability.
Chartered Accountants
A chartered accountant is a bookkeeper - that description would be akin to calling a civil engineer a builder, in its most basic essence correct, yet missing the absolutely huge array of specialised skills and the value they bring
Tax Consultants Guide to Financial Advisers
Nearly everyone at some stage in their life will need help and advice with their financial affairs.
Understanding & Spreading Risk
Financial consultants always make sure that we’ve read the small print – so we all know that the value of an investment can go down as well as up but what does this actually mean to you?
Making £10,000 Company Profits Tax Free!
Making £10,000 Company Profits Tax Free! – 7 Tax Tips for Property Investors — TaxationWeb (March 2004) by Ian McTernan, CTA
Tax Consultants Guide to defending your wealth – Part 1
You’ve worked hard and invested hard, don’t overlook the importance of defending your wealth. The defence of your investment portfolio is every bit as critical as portfolio building.
Scared of the Mortgage Minefield?
The thought of finding and securing a mortgage can be daunting and confusing. Use our no nonsense, cut to the chase mortgage guide to remove the dread!
What's The Point of an IFA?!
It's up to you to make sure that your personal financial and taxation situation is healthy and that you are fully protected - but the financial service industry is a complex beast so what can you do? Get and IFA to help you?
10 of the Worst Financial Mistakes and How to Avoid Making Them!
Are you taking risks with your financial future? Find out with Tax Consultants Guide's list of 10 of the top financial mistakes: read on and get your financial affairs in order today!
Buying Abroad - The Tax, Financial and Legal Considerations
A growing number of Britons are considering the option of buying a second property abroad but have these people considered the far reaching legal, financial and taxation implications of such a venture?
Sailing Your Business Offshore
Is it your dream to one day have enough money squirreled away so that you can retire to the sun?
Investing Offshore? Me?
Surely investing offshore is only something the rich and famous get up to?
Isn’t it just a way for them to avoid taxes and shuffle up the ‘world’s most wealthy’ lists?
Tax, financial and legal considerations when buying a second home abroad
With the UK housing market seemingly ever on the up and the state and confusion surrounding the pensions market getting ever worse, are you one of a growing number of Britons who are considering the option of buying a second property abroad?
Maximise Your Investments
What needs to be done now to secure your future; and what can realistically be done now to enable your dreams and those of your family?
Reduce Your Taxes
To reduce your taxes you have to understand taxes – whether as an individual or as a business owner. Getting to grips with tax matters and your taxation liability is the first step on the road to saving yourself money and not over-paying the tax man!
Boosting Company Profits
There are many areas of concern to a business owner or partner, from taxation and financing to effective planning and structuring. But the bottom line has to be running an effective profitable operation.
Finding the Right Adviser
There are always people out there who can help, guide, encourage and support. Just make sure those people are fully qualified to give the advice you seek and remain active rather than passive in your quest for personal or company financial solutions.
Your FREE Information Service
Tax Consultants Guide: your free information service! We’re NOT owned by a financial services company, we’re 100% independent, and we aim to give generic advice on taxation, financial and business planning.
Becoming a Landlord – Quick Considerations
To save you some time and effort drawing up a list of the pros and cons of investing in property, Tax Consultants Guide have made a start on the list for you...
Investing in commercial property.
As an alternative for your retirement planning considerations have you thought about the possibility of investing in commercial property?
Funding Education Part 1
The Value of Education Versus the Cost
Part One - Private Education for Your Child
Funding Education Part 2
The Value of Education Versus the Cost
Part Two – University & Higher Education for Your Student Child
Asia Tsunami Relief: Kids ask to donate
by Drew Harris, 2005
http://www.adwords-hints.com/tsunami
An Old Dividend Stock Investment Idea, for a New Generation
Death and taxes! The certainties of life! And then, of course, there are the mortgage payments, the utility bills, phone bills, the car payments and thirsty automobiles. Add that to the grocery and clothing bills, and there appears to be more then just de
An Economical Retirement Investment Plan
The practice of economy, directed toward a retirement investment plan in the stock market, is in itself a source of great revenue. It is the art of making the most out of every stock market investment, with the definite purpose or goal being to provide a
Seven secrets take to get—and stay—out of debt
As vice president of the American Credit Foundation, a nonprofit organization that helps individuals and families manage their debt, Mike Peterson knows firsthand how financial problems can wreak havoc in one’s life. Each day, counselors at the Midvale, U
Going Offshore For Asset Protection
There are a number of key reasons why individuals and businesses consider going offshore for asset protection purposes.
Welcome to the May 2005 Property Investment and Tax Newsletter
Well, I am sure you will all have heard by now that the government has finally decided to get tough (but not tough enough) on the so called get-rich-quick companies that have been fleecing property investors. Earlier this month the government used compuls
FREE Tax Health Check
1 in 3 people are due a tax refund, over £60 million secured to date.
An Economical Retirement Investment Plan
The art of making the most out of every stock market investment, with the definite purpose or goal being to provide a life that is fully independent of monetary concerns.
How to Claim EVERY Lucrative Tax Deduction....
FINALLY discover how to take advantage of every
lucrative tax deduction available to you, resulting
in a potential windfall in tax savings from your
home based internet business.
Ranjan provides 7 F’REE Property Investment Strategy Reports which cover: