Buying and selling property – who should be giving you tax advice?

12 February 2020

It used to be simple: the closest lawyers and estate agents got to giving tax advice was to hand out the address of their nearest accountant.

But suddenly it has become a lot more complicated, and it all has to be dealt with, including returns made and any tax paid, a lot quicker.

Land tax considerations

Purchasers buying property in England, Northern Ireland, Scotland and Wales have to consider Stamp Duty Land Tax (SDLT), Land and Buildings Transaction Tax (LBTT), and Land Transaction Tax (LTT) respectively. SDLT has to be paid within 14 days of the transaction, and LBTT and LTT within 30 days.

Sellers will now also have to consider Capital Gains Tax (CGT) on sales of residential property and make a return and pay any CGT within 30 days of completion.

Where is the property?

So, there are a lot of decisions to be made very quickly. First of all, it is crucial to establish where the property in question is. It sounds obvious, and often will be, but where transactions cover properties in two or more jurisdictions, for example a purchase of shops in Bristol, Cardiff and Edinburgh, or a farm straddling the English/Welsh border, then a ‘just and reasonable’ apportionment will need to be made with the different rules and rates applying to the apportioned amounts (all of which can be challenged by HM Revenue & Customs, Revenue Scotland or the Welsh Revenue Authority as appropriate, or even all three!).

Is it residential?

Next, it is necessary to establish if the property is residential, non-residential or mixed. And then there are various claims to consider such as multiple dwellings relief (MDR) etc.

The sellers and their advisers will need to consider if the property is residential, in which case CGT will need to be considered. Amazingly, the definition of ‘residential’ is slightly different than the one used for the land taxes. If the property is residential, then a capital gains tax calculation will need to be performed, which may involve considering cost, probate value if inherited, improvement expenditure, private residence relief (now more restricted), annual exemptions and losses. All of this has to be done within 30 days of the purchase, and it will still need to go on your tax return at the end of the year to work out the final liability!

For more advice or information on property tax, please contact your local UHY adviser.