Income tax v's capital gains tax on property.

System

Ok i've been delving into the horrors of income from trade and capital gains tax.

I read alot of stuff on property and people always seem to be talking about paying capital gains tax when buying and selling properties. But from i've learnt it would seem to me that if you sell more than one property that is not your primary residence it would be classed as trading income and not capital gains tax?

Can anyone put my inquisitive mind at rest?

thanks.

System

Re:Income tax v's capital gains tax on property.

Have you covered the badges of trade?

Trading with property would be essentially buying, "doing up" and then selling. This would be taxed to schedule D case I (old system), Trading Income. (new system)

If you bought a property as a "one off" then done it up and sold it this would be taxed to CGT a depending on the length of time you held this property you may qualify for non-business taper relief.

If you bought a property and rented it this would be taxed under schedule A (old system) Propert Income (new system).

Hope that helps.

Regards

Dean

System

Re:Income tax v's capital gains tax on property.

Dean wrote:

Have you covered the badges of trade?

Trading with property would be essentially buying, "doing up" and then selling. This would be taxed to schedule D case I (old system), Trading Income. (new system)

If you bought a property as a "one off" then done it up and sold it this would be taxed to CGT a depending on the length of time you held this property you may qualify for non-business taper relief.

If you bought a property and rented it this would be taxed under schedule A (old system) Propert Income (new system).

Hope that helps.

Regards

Dean

Yes i've covered badges of trade, but only sketched over it and am still putting it to memory.

But to be more specific, i'm talking about finding properties that are BMV (below market value) snapping them up, then selling them on the market value quickly, making a profit in the process.

From the stuff I learnt from badges of trade that would be classed as trading and any profits would be assessed under income tax. Would you agree? The only reason i'm in doubt is that the BMV traders I read about on the internet always seem to be talking about paying capital gains.

System

Re:Income tax v's capital gains tax on property.

From the stuff I learnt from badges of trade that would be classed as trading and any profits would be assessed under income tax. Would you agree?

Yeah I would agree.

The badges of trade:-
Profit seeking motive
Frequency and number of similar transactions
Modification of the asset in order to make it ore saleable
lenght of ownership

That is not a exhausted list but to answer your question the "BMV traders" as you put it may well be paying CGT rather than Trading tax on the single basis that they are not modifying the buildings before they're sold?

Regards

Dean