Betterbiz,
The company is making an INVESTMENT in income units in a HDT. End of story.I certainly hope so!
think of it as my HDTBut that’s the thing: if it was your HDT and only returning a small amount of income (say 2%-3%) with no option for capital gain, and expected to remain like that, then I think as a director I would have trouble justifying that as being in the best interest of the company shareholders given I could get 5%+ just by putting the money in the bank. I’m sure if the shareholders were other than myself, they would certainly be questioning it.
With your HDT though I could argue that the expectation is for better income returns over time, as I have no control over your trust, but with mine, where I’m a trustee, I have the ability to ensure that doesn’t happen if it’s in my personal best interest for it not to (say because the tax rate is lower that way – possibly leading to a part IVa issue?).
don’t forget that we operate under the self-assessment regimeIn some ways that makes it worse, in that you won’t know if you have a problem until you get audited. And by then there could be a few years worth of unpaid taxes, interest, and penalties to be lumped with if you do.
Unless of course you get a private ruling in advance.
But then, I could also just be worrying too much… [
].Anyway, thanks again. I’ll see what my paid advice finally comes up with.
Cheers,
GPMy intention is to hold land for 12 months from contract and build during that period, then after 12 months sell the property, then pay income tax on 50% of the profits, would that be correct?.
Gumshoe,
As your intention is to develop the property to sell for a profit, rather than use it for generating income, then I don’t believe you’ll get the 50% discount. I think you’ll end up paying tax on 100% of the profits.
However, I’m not an accountant and this is just my understanding, so seek your own professional advice. An accountant may convince you that you are mistaken in your intentions…
GP
The loan for the property is an investment loan with lender on the basis its to be rented out. The other thing is I’m on a low income bracket. The opinions are that after 12 months it would be treated as income on 50% of any profit made. Also its a one of deal and its not a business. Profit should be $50K, so I think taxed 50% on that.
Gumshoe,
Well the intention you’ve specified to the lender doesn’t match the intention you’ve stated here. You may want to stick with just one intention to avoid later problems.
I don’t see that being in a low income bracket would make any difference. It would just affect the rate of tax, not what percentage of the profits it was paid on.
Again, I’d suggest you see an accountant for professional advice on this.
GP
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