brilliant strategy - I'm sure it was legit - however (and I'm uncertain here!) - would the new gaar rules against artificial tax avoidance cover this now?

YOUR QUESTION - "1) Is there a retrospective route one could go down with existing properties in joint names to mitigate CGT by removing say one partner from the deeds and then doing this strategy in say 10 years time to take advantage of it. I assume tax payable up to this point would be payable but you may gain 10 years tax free future growth or am I clutching at straws"

MY ANSWER - yes, this can be done retrospectively so long as your mortgage lender will play ball. Just write to them and ask how to go about taking your name of half of the mortgage deeds and your wifes off the other half. They will probably assume you are seperating or getting divorced as that's the most common reason this happens. Don't over complicate the issue, just tell them what you want to do. This will not change the base cost. The new base cost will be applicable when you sell your properties to your wife and she sells hers to you. This could even be the day after so it's happy days. You will both need to repay the old mortgages and arrange new ones so there will be a cost involved and you will need to take a commercial view when you do this of whether the benefits outweigh the costs. Your point about 10 years, is therefore a red herring.

YOUR QUESTION - 2) If done retrospectively as in 1) would an alternative maybe using a company be beneficial in any way. For example selling to a company you are both directors of ( CGT payable at that point) then each of you buying it back from the company.

MY ANSWER - Ditch that one as a bad idea. I can't think of any scenario where this would be worthwhile.

YOUR QUESTION - 3) Are their any negative implications in the strategy - for example if the partners were to split and divorce before selling to each other. Presumably not if they bought one alternatively as they built the portfolio but it could get potentially messy if the houses they sell to each other were unequal value. But no more messy i guess than any divorce would be.

MY ANSWER - there are costs of using this strategy and a commercial decision needs to be taken. Costs are stamp duty, legal fees and the costs of obtaining new mortgages. Your retrospective strategy will also involve some small costs as lenders are likely to make a charge for removing a person off the mortgage deeds if they agree to do that and you will need a solicitor too. Other than costs there are no real negatives. Divorce would probably require assets to be split anyway so in a strange sort of way, doing it whilst you are not thinking of getting divorce could actually make a divorce sitiation slight less stressful and adversarial if a relationship were to break down after instigating this planning.

YOUR QUESTION - 4) What would be the costs involved for strategy 1) and 2) if feasible

MY ANSWER - it depends. I've explained above how the costs arise but each case would need to be costed individually as there are too many variables in terms of lenders fees, property values affecting stamp duty etc. for me to offer any realistic ballpark figures.

Thanks v much Jonathan

You are very welcome - Mark

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In response to Jonathan Clarke

(14-09-2012 12:33 PM)Mark Alexander Wrote:  YOUR QUESTION - "1) Is there a retrospective route one could go down with existing properties in joint names to mitigate CGT by removing say one partner from the deeds and then doing this strategy in say 10 years time to take advantage of it. I assume tax payable up to this point would be payable but you may gain 10 years tax free future growth or am I clutching at straws"

MY ANSWER - yes, this can be done retrospectively so long as your mortgage lender will play ball. Just write to them and ask how to go about taking your name of half of the mortgage deeds and your wifes off the other half. They will probably assume you are seperating or getting divorced as that's the most common reason this happens. Don't over complicate the issue, just tell them what you want to do. This will not change the base cost. The new base cost will be applicable when you sell your properties to your wife and she sells hers to you. This could even be the day after so it's happy days. You will both need to repay the old mortgages and arrange new ones so there will be a cost involved and you will need to take a commercial view when you do this of whether the benefits outweigh the costs. Your point about 10 years, is therefore a red herring.

YOUR QUESTION - 2) If done retrospectively as in 1) would an alternative maybe using a company be beneficial in any way. For example selling to a company you are both directors of ( CGT payable at that point) then each of you buying it back from the company.

MY ANSWER - Ditch that one as a bad idea. I can't think of any scenario where this would be worthwhile.

YOUR QUESTION - 3) Are their any negative implications in the strategy - for example if the partners were to split and divorce before selling to each other. Presumably not if they bought one alternatively as they built the portfolio but it could get potentially messy if the houses they sell to each other were unequal value. But no more messy i guess than any divorce would be.

MY ANSWER - there are costs of using this strategy and a commercial decision needs to be taken. Costs are stamp duty, legal fees and the costs of obtaining new mortgages. Your retrospective strategy will also involve some small costs as lenders are likely to make a charge for removing a person off the mortgage deeds if they agree to do that and you will need a solicitor too. Other than costs there are no real negatives. Divorce would probably require assets to be split anyway so in a strange sort of way, doing it whilst you are not thinking of getting divorce could actually make a divorce sitiation slight less stressful and adversarial if a relationship were to break down after instigating this planning.

YOUR QUESTION - 4) What would be the costs involved for strategy 1) and 2) if feasible

MY ANSWER - it depends. I've explained above how the costs arise but each case would need to be costed individually as there are too many variables in terms of lenders fees, property values affecting stamp duty etc. for me to offer any realistic ballpark figures.

Thanks v much Jonathan

You are very welcome - Mark

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(14-09-2012 09:20 AM)Stuart Abrams-Humphries Wrote:  brilliant strategy - I'm sure it was legit - however (and I'm uncertain here!) - would the new gaar rules against artificial tax avoidance cover this now?

I do not believe so. However, I really must point out that my post here must not be read as advice or taken as professional advice in any way. I am merely sharing a strategy which could be out of date, although I don't think it is. Anybody wishing to progress matters should take their own professional advice from appropriately qualified tax/legal advisers with adequate Professional Indemnity insurance. I do not fit this description, nor do I own a stake in or earn commission from any business that does so I can hand on heart state that I'm not touting for business.

I will, however, be pleased to refer anybody who's genuinely interested in this strategy to my personal professional advisers if requested. If anybody takes me up on this and they are happy they buy me a drink next if they want to.

Regards

Mark Alexander

Cheers Mark - Definitely food for thought. Thanks for your time - Jonathan

Interesting thread. Reminds me, I must find a good accountant that understands property investing. Any suggestions?

One question for clarification.

Example: I buy a property for 80k, spend 10k doing it up and remortgage it at a new value of £120k (75% LTV so 90k debt)

Can I add the £10k capital invested to the total value of the property when calculating the tax deductible amount? In other words are interest payments tax deductible on £90k (price plus refurb costs) or £80k (just price)?

In a nutshell you always look at the purpose of the loan.If it was for business purposes then the interest charged on the loan should be deductible.If you raise a loan for holidays it is not a business expense and therefore the interest charged on the loan will not be deductible.

It is quite simple really.

(01-10-2012 11:20 PM)luke_vincent Wrote:  Interesting thread. Reminds me, I must find a good accountant that understands property investing. Any suggestions?

One question for clarification.

Example: I buy a property for 80k, spend 10k doing it up and remortgage it at a new value of £120k (75% LTV so 90k debt)

Can I add the £10k capital invested to the total value of the property when calculating the tax deductible amount? In other words are interest payments tax deductible on £90k (price plus refurb costs) or £80k (just price)?

In this scenario I agree with Bill, you can claim tax releif on the whole £90,000.

Even if you had purchased the property for cash you would still be able to claim tax relief on the full £90,000 as you "base cost" would be £80,000 plus £10,000 of capital improvements. Note that as the £10k is capital improvements you must not deduct that amount as expenditure from rental income though.