Property Flipping and Development are Trades (not investments), so YES, they could qualify for Entrepreneurs Relief.
You may be able to pay less Capital Gains Tax when you sell (or ‘dispose of’) all or part of your business.
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.