Capital Gains or Earnings

nad

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Hi
if a person who is in the paye system bought a site and builds 2 houses in partnership with another person and sells the houses..Is the profit taxed as CGT or as earnings......
 
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Thanks for that.
What actually determines which type it is...
 
AFAIK

If you are in business buying sites and building to sell then its taxed as earnings. If it is something you do outside the normal course of business then it is a capital gain.

I would have thought that for the example you give is the treatment is unclear.

Was it a one off or something you do repeatedly, or intend to do repeatedly.
 
No it's a one off ...and most likely not to be repeated ...it's just an opportunity I've been offered and I'm unsure about the tax implications as I've only always been in the Paye system...
 
google "the badges of trade", this is normally a guide on separating the two. It looks at things like motive realization frequency
 
No it's a one off ...and most likely not to be repeated
Apologies, it's a very complex area that deserves more than my 1 word answer.
The number of times you do this is just 1 of the factors that decides if it's an investment (capital gains tax) or a trade (income tax). In your case, the intent and motivation are large factors. Generally speaking, unless it was your intention at the outset to hold the property as an investment or occupy it yourself and changed circumstances forced you to sell, then it would be classed as a trade.

Get proper advice if this is something you're considering. Since 2008 VAT must be charged on new builds (again intent comes into it), so you'll have to register for VAT. You may also need to register as a contractor and process RCT if you've sub-contractors. It can get messy if you're not on top of it. Might be worth exploring doing via a company structure.
 
This is complex. 'Badges of trade' may be relevant as may be dealing in or developing land provisions contained in sections 639 to 644. Complex anti avoidance material and seek good professional advice. As RedOnion mentions vat and RCT will also need to be considered.
 
Don't assume a profit without running the numbers, vat is payable on the gross amount and as you are not vat registered you cannot reclaim any portion of that, it is considerable, get advice.
 
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