liteweight said:Find this a bit confusing. When do you officially own a property..is it when you sign contracts or when you hand over the money? If it's upon final payment and you never reach that stage, then how can it be a capital gain?
Howitzer said:Exactly, it's simply income, and should be taxed at your marginal rate.
That would be my take on it too - it would be unlikely to be classifed as income unless it the 'flipper' was doing this on a large scale. However as discussed elsewhere, I don't see why a developer would allow this sub-sale of a contract to take place.I agree it will get caught one way or the other as either income or a capital gain but I think there is potential to regard it as a capital gain.
By paying a booking deposit you are buying a contract to purchase at a fixed price and then when you flip you are selling your interest in this contract on to a third party so you could argue it is similar to a financial instrument such as a share (or probably more closely a derivative of some sort similar to an option).
I presume when a developer is selling off plans he needs cash flow and to possibly prove to bank that development is viable. Cash in hand might be better than a little bit extra down the road. I suppose public perception of the development at its first stage might be important too i.e. better get in quick for 2nd phase as 1st phase 'flew out the door'Glenbhoy said:That would be my take on it too - it would be unlikely to be classifed as income unless it the 'flipper' was doing this on a large scale. However as discussed elsewhere, I don't see why a developer would allow this sub-sale of a contract to take place.
liteweight said:At any rate, they do allow it as I've friends who have done it!
Fair enough those are valid suggestions, but if you check out the other thread on this matter, the general legal opinion seems to be that a standard contract does not allow for this - i know any I've seen don't allow, but that's not to say it does'nt exist.liteweight said:I presume when a developer is selling off plans he needs cash flow and to possibly prove to bank that development is viable. Cash in hand might be better than a little bit extra down the road. I suppose public perception of the development at its first stage might be important too i.e. better get in quick for 2nd phase as 1st phase 'flew out the door'
At any rate, they do allow it as I've friends who have done it!
Howitzer said:What did they do regarding the 20% CGT v 42% marginal income tax issue?
Glenbhoy said:Fair enough those are valid suggestions, but if you check out the other thread on this matter, the general legal opinion seems to be that a standard contract does not allow for this - i know any I've seen don't allow, but that's not to say it does'nt exist.
.therave said:the builder has to agree to a sub - sale and his solicitor has to then put it in the contract.. as said above allowing this does help the builder sell out phase 1 quickly and show contracts to the bank,, if you do get a sub sale and it doesn't sell then you do have to buy it.. the builder won't wait forever.this is the reason the timing of you selling your property is crucial.. the tax to pay is CGT and not income tax.. i contacted the revenue about this
phoenix_n said:[thanks CC for pointing out the thread - didnt realise what a source of information this forum is]
As i understand 'flipping' is selling on your contract to another person.
But if you actually bought the place, put it up for sale and sold it and bought off the plans, sold it on completion is there any catch besides transaction costs (and say 2 months mortgage). (assume FTB so no stamp duty costs)
liteweight said:Although you are FTB, if you sell before you've owned for 5 years there is a stamp duty clawback, so effectively you pay stamp duty! It does not make sense to me to complete and then sell.
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