Property Flipping and Development are Trades (not investments), so YES, they could qualify for Entrepreneurs Relief.
Entrepreneurs’ Relief means you’ll pay tax at 10% on all gains on qualifying assets.
Work out if you qualify
You’ll qualify if you dispose of any of the following:
- all or part of your business as a sole trader or business partner – including the business’s assets after it closed
- shares or securities in a company where you have at least 5% of shares and voting rights (known as a ‘personal company’)
How does Entrepreneurs Relief help?
Let’s take an example using a Company
Flipping or Development Profit £100,000
Corporation 20% £20,000
Profit after Tax £80,000
If close the business and you apply Entrepreneurs Relief the you will pay 10% tax = £8,000
You will also get your CGT allowance of £11k deducted first.
Without Entrepreneurs Relief the tax would 20% or even more if the distribution was via dividends or salary. For unincorporated businesses the tax could be 20%, 40% or 45%!
What are the rules for ending a business?
- The business has ceased.
- The assets were in use at the time of cessation.
- The business was owned for 1 year by the individual prior to cessation.
- The assets were disposed of within 3 years of cessation.
- The assets are not held as investments.
However, if you do the same thing within 2 years HMRC may consider that you are only doing this to gain a tax advantage and it could then be treated as income.