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Re: Tax advice for prospective developers

I'm toying with the idea of leaving my job, and becoming a property

> developer. My Dad is a joiner, and would either work for my company > (I'm assuming I would set up an off the shelf limited company), or > would co-own it. > > One area we know very little about is tax, i.e. if a profit is made on > sale of a property, which types of tax are payable, at which rates, > and when.

If you are developing, as opposed to doing up and re-selling what for the duration would be your private residence, then there is no chance of it falling under CGT regime, so it would be income tax which applies, or it would if you were a sole trader or partnership. As you're to operate as a Ltd Co, the company would pay corporation tax on profits after expenses, and then its owners (you) would pay tax on dividends the company pays you.

What taxes have to be paid when tradesmen are paid for work on the > property?

None if the tradesmen are contractors. But if you take them on as employees, you have to pay employer's NI contributions at 12.8% of earnings in excess of £89pw, plus of course you have to administer employee's NI and income tax.

Are expenses in renovating the property (wages, materials, etc) taken > into account when tak is calculated on profit when selling? If so, > how?

Of course. Profit equals income minus expenses. You pay tax only on profit.

Suppose you buy a house for £50k, spend £10k on materials and services, and employ your dad for £20k and yourself for £5k. You sell the house for £100k. Then the company would have made £15k profit. You and your dad would pay income tax and NI on your own wages, and the company would pay nothing for the first £10k of profit and 23.75% Corporation Tax on the other £5k. You could either leave the remaining £13812 in the company as working capital to help buy the next ruin, or pay it to yourself as dividends, on which no further income tax would be due by you unless this would push you into the higher tax bracket (and if it did you would pay

25% of the bit that's over the threshold).
Reply to
Ronald Raygun
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But then you will have to study the intricacies of the CIS

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Tim

Reply to
tim

No, I didn't mean that kind of contractors, I meant a normal tradesmen's business who comes along and quotes for a whole job including parts and labour - as opposed to employing the labourers yourself.

As a normal customer of such a business, you don't get involved in their tax affairs, surely.

Reply to
Ronald Raygun

If you are a property developer, then yes. The 18% tax deduction, where applicable, only comes off the labour element, but you still have to do the paperwork.

Reply to
Jonathan Bryce

In article , Keith writes

I get a building firm to quote for each job, or part of a job, and they take care of the admin of the labourers and trades.

My accountant keeps a fairly close eye on everything I do, (after the event obviously), and, whilst he does raise lots of seemingly petty queries, he has never raised the issue of dealing with builders tax and stuff.

I guess that, if you "employ" individual self employed tradesmen on a "permanent" basis, perhaps you do take on different responsibilities.

Reply to
Richard Faulkner

In message of Thu, 25 Sep 2003, Richard Faulkner writes

Depends what business you are in yourself. If you are a builder, property developer or some related industries, then, yes you are involved with the CIS scheme and should be deducting 18% from the labour element.

However if you are a shop-keeper selling widgets (eg) and you employ a builder to alter/extend your shop, then you wont be involved with CIS.

DF

Reply to
David Floyd

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