Property Practice - tax

Question 10

What is LTT/ SDLT payable on?

Answer 10

the property and the VAT element (so the price VAT inclusive)

paid resi and comm prop

Question 11

When will VAT apply on comm prop?

Answer 11

up to 3 years old/ exercised option to tax

Question 12

Who pays VAT?

Answer 12

Buyer or chargeable on rent paid to tenants if option to tax

Question 13

What is exempt from CGT?

Answer 13

principle residence

Question 14

Who pays CGT?

Answer 14

seller

or landlord if rent received

Question 15

When pay SDLT?

LTT?

Answer 15

England - sale of freehold or grant of new lease/ assignment

(payable on all transactions)

LTT - same but Wales

Question 16

How to decide SDLT tax rate?

Answer 16

Payable on consideration for the land

Question 17

SDLT tax rates - residential

Answer 17

125,000 - 0%
125,001 - 250,000 - 2%
250,001 - 925,000 - 5%
925,001 - 1.5m - 10%
above 1.5m - 12%

Question 18

SDLT tax rates - non -residential/ comm prop

Answer 18

150,000 - 0%
150,001 - 250,000 - 2%
above 250,000 - 5%

payable on VAT inclusive amount

Question 19

SDLT rates for residential first time buyers

Answer 19

no SDLT up to 300,000
300,001 - 500,00 = 5%

no relief if above 500k

Question 20

Who is a first time buyer?

Answer 20

Not owned a freehold/ leasehold anywhere in the world & only / main resi

for joint buyers - both must be first time buyers

Question 21

What tax do addtional home buyers pay?

Answer 21

pay 5% on top of main rates

does not apply if replacing one already sold

Question 22

what rates do companies pay on SDLT - resi?

Answer 22

Higher rates (usually 5% more)

but over 500k a special rate of 17% may apply

Question 23

What happens if buy a house before yours has sold?

Answer 23

Pay higher rates (5% more)

but sell in 36 months = get refund

Question 24

what rate do non-uk residents pay on SDLT?

Who are they?

Answer 24

2% surcharge on the relevant rate

not present in UK for at least 6 months in previous 12 months

Question 25

When must a return be sent to HMRC? Form?

Answer 25

All transactions above 40k (with the tax payable)

SDLT1/ SDLT2 (more than 2 sellers/ buyers)

SDLT3 (additional property purchase)

SDLT4 (complex transactions, corp, leases)

within 14 day of completion or performance of the contract (e.g tenant moves in)

Question 26

Land transaction return certificate?
Required for?

Answer 26

SDLT5

Register disposition at land reg

Question 27

How can save on tax? Risks?

Answer 27

Apportion purchase price to chattels

potential for fraud if the apportionment is not genuine/ chattels overvalued/ items classed as fixtures are included!!

ethics issue

Question 28

LTT rates - resi

Answer 28

225,000 - 0%
225,001- 400,000 - 6%
400,001 - 750,000 - 7.5%
750,001 - 1.5m - 10%
above 1.5m - 12%

Question 29

LTT rates - non- resi / comm prop

Answer 29

225,000 - 0%
225,001 - 250,000 - 1%
250,001 - 1m - 5%
above 1m - 6%

Question 30

rules on additonal properties in wales?

Answer 30

Same as England

own prop 40k & buying another over 40k

refund if sell in 36 months

Question 31

Higher LTT rates for additional property?

Answer 31

180,000 - 5%
180,001- 250,000 - 8.5%
250,001 - 400,000 - 10%
400,001 - 750,000 - 12.5%
750,001 - 1.5m - 15%
above 1.5m - 17%

Question 32

What does not apply in wales?

Answer 32

First time buyers relief

2% surcharge non- uk residents

Question 33

LTT return?

Answer 33

30 days

WRA certificate is required to reg at HMLR

Question 34

SDLT on leasehold transactions

Answer 34

tax is paid on the premium (inc VAT) **and** the NPV SDLT return not required if less than 7 years and no SDLT is due (premium less than 40k) not due if 7 years or more an premium less than 40k/ annual rent less than 1000£

Question 35

LTT leasehold transactions

Answer 35

charge on premium **not** NPV in a resi lease but other leases paid same as freehold BUT no 0% band - *1% where the rent in any 1 term exceed 13,500£* * SDLT return not required if less than 7 years and no SDLT is due * not due if 7 years or more an premium less than 40k/ annual rent less than 1000£

Question 36

What is the rule on assignment of lease - LTT

Answer 36

same as freehold LTT return submitted if PP 40k or more even if no LTT is due not payable on rent (paid when granted)

Question 37

Who is a taxable person?

Answer 37

make taxable supplies and registered must reg if supplies exceed 90k (or else voluntary if make taxable supplies)

Question 38

zero- rated supplies

Answer 38

**taxable at 0%** - non-catering food, books, water, construction of dwellings

Question 39

exempt supplies

Answer 39

resi, old comm prop, grant of lease no option to tax, finance, educatiom, health, insurance insurance co/ banks/ building soc - CANNOT RECOVER (VAT sensitive)

Question 40

when is VAT not payable?

Answer 40

resi: - sale or letting - sale newbuild resi - sale buy to let resi

Question 41

VAT on comm prop

Answer 41

up to 3 years old - automatically compulsory standard rated more than 3 years old/ greenfield site - exempt (can exercise option to tax) grant of lease - exempt but option to tax

Question 42

Effect if option to tax?

Answer 42

Effects future sale/ any rent charged / input tax incurred (which can be recovered) 'waive exemption'

Question 43

When must option to tax be submitted to HMRC?

Answer 43

within 30 days of deciding to exercise it

Question 44

Why exercise option to tax?

Answer 44

enable seller / landlord to recover input tax (on purchased goods) on construction / refurb/ professional services ***purchaser will pay VAT on PP and then SDLT/LTT will be paid on top!***

Question 45

what to consider when exercising option to tax?

Answer 45

who will be the buyer / renter? are they VAT sensitive and not reclaim?

Question 46

How to calculate chargeable gain?

Answer 46

sale price (market value if undervalue/gift) - acquisition cost - allowable expenditure (improvements/ professional costs) - annual exemption (3k) freehold and leasehold are chargeable assets **paid by individuals**

Question 47

when is CGT not payable?

Answer 47

PPDE private resi relief - main resi *throughout period of ownership* garden no more 0.5 hectares if more than necessary enjoyment - CGT payable on hain relating to size of plot over and above this

Question 48

what are disregarded for allowed absences - PPDE

Answer 48

before March 1982 = ignored a) last 9 months of ownership (36 if disabled or care home b) first 24 months if probloems selling another house/ works carried out c) employment overseas d) 4 years for employment/ distance prevents living at home e) any period for up to 3 years in total for any reason employment ones also apply if spouse employed abroad etc d continue if not possible to return home

Question 49

when will PPDE not apply?

Answer 49

to any part of the proprty used for business purposes (separate relief not shared with the household)

Question 50

when is an election made if you have more than 1 property? Spouses?

Answer 50

within 2 years must elect (can be revoked) 1 election for spouses/ cp

Question 51

when will a garden above 0/5 hectares not be charged additonal CGT?

Answer 51

If it can be argued it is necessary for the reasonable enjoyment of the house (proportionate to large house)

Question 52

When is CGT due?

Answer 52

60 days of completion