The document outlines 7 methods for legally avoiding property tax: 1. Capital gains tax exemptions for principal private residences and partial letting exemptions. 2. Claiming repairs and maintenance as expenses to reduce taxable profits rather than improvements which reduce capital gains. 3. Using intermediaries like letting agencies to divert rental profits to lower-tax entities. 4. Claiming interest deductions on mortgages and loans related to investment properties. 5. Strategies for avoiding stamp duty land tax, though some may no longer be valid after recent changes. 6. Claiming capital allowances for properties with communal facilities like houses of multiple occupancy. 7. Hiring a

1. 7 Ways of Avoiding Property Tax -
Legally
INVEST PROFIT
TAX
SAVINGS

2. Contents
Who are C Charles & Co?
Background of Nicholas Charles
Brief lowdown of all the taxes & their
interaction
The 7 methods

3. Who are we?
Part of Charles Group a professional hub for successful fast growing
entrepreneurs and investors looking for leading edge financial advice.
Family run accountancy firm based in North London
Established over 35 years ago
We offer added value services for our clients including:
»High level tax strategies
»Property tax planning
»Property consultancy
»Provide access to our team of IFAs, mortgage brokers,
solicitors, offshore trusts and worldwide accountants.

4. Nicholas Charles FCCA
Qualified accountant who joined C Charles
& Co in September 2003.
Recognised as a Fellow Chartered Certified
Accountant in May 2009
Property tax expert and a consultant on
high level tax strategies for high net worth
clients
Owns and runs a multi million pound
property portfolio
Brokered a property deal for a client worth
more than £2m!

5. WHAT DO YOU WANT
FROM TODAY?
WHAT DO YOU EXPECT
TO GAIN OR LEARN?

6. UK TAXES
Income Tax and PAYE
Corporation Tax
VAT
National Insurance Contributions
Inheritance Tax
Stamp Duty Land Tax
Council Tax
Other duties and tariffs chargeable on items such as
alcohol and petrol
Govt Borrowing!!! (as per the Dec 2010 National
Statistics UK government NET Borrowing was £149
billion! Total debt was £1105.8 billion!)

7. THE PAIN OF TAX!
EMPLOYEES
Pay tax EVERY month
20%/40%/50%
NIC = 11.8% + 1%
Very little control of money and taxes
SELF EMPLOYED
Pay tax twice a year – 31/01 + 31/07
20%/40%/50%
NIC = 8% + 1%
Can include expenses to reduce profits
Good setup if profits are within basic rate

8. THE PAIN OF TAX!
COMPANIES
Pay tax twice! Corp Tax AND Income Tax
Good strategy for 40%/50% taxpayers
Small wage + dividends
Onshore vs. Offshore
INVESTMENTS
CGT vs. Income Tax and Corp Tax
CGT is flat rate @ 28%
Get this wrong and it could cost you
a LOT of money

9. ENTREPRENEURS + TAXES
• Sir Philip Green
• Multi-billionaire owner of Arcadia
Group and BHS
• 2005 paid himself a dividend of
£1.17 Billion!
• Total Tax Paid was £ ZERO!
• Saved an estimated £292 Million
in taxes!

10. ENTREPRENEURS + TAXES
• Tax planning is the easiest way of making
money.
• Therefore does it make sense to have a good
tax advisor on your power team?

11. What Do You Want To Do?
Start a new business?
Buy a business?
Grow your existing business?
Save your money
Invest in stocks and shares?
Invest in property?
Decide what tax planning
compliments your goals. Build
tax strategies around your
goals and not the other way
round

12. The 7 Key Areas
Choosing the Right Entity – trading or investing?
PROPERTY TAX PLANNING
1. Capital Gains Tax and PPR
2. Expenses vs. Improvements
3. Using intermediaries to reduce your tax liability
4. Utilising Interest
5. Stamp Duty Avoidance!
6. Capital Allowances for HMOs
7. …

13. Choosing the Right Entity
Setting up a trading business?
– Sole trade
– Partnership
– Limited Liability Partnerships
– UK Companies
Investing?
– Personally
– Partnership
– Limited Liability Partnerships
– UK Companies

14. TRADING OR INVESTING?
• The UK tax treatment of a trade is different
to that for an investment, whether it be as
a sole trade, partnership, LLP, company or
trust!
• If a company undertakes a trade and
holds investments the UK tax treatment
can be affected!

15. POWER TEAM – Who is in
Yours?
• The worst mistake I have seen is when people
try and “go it alone”. This may save money but
how will you expand your business or property
portfolio?

16. PROPERTY TAX

17. PROPERTY TAX
BRAINSTORM
• List as many type of
property
investments/transaction
as you can
• Categorise them as either
an investment or a trade

18. PROPERTY TAX
1. Buy to let
2. Property developing
3. Commercial property
4. Overseas property
5. HMOs
6. Options – Lease, Buy, Sandwich
7. Purchase, add value and re-mortgage
8. Flips
9. Developing new builds for sale

19. 1. CGT and PPR
Principal private residence relief (“PPR”)
• What is PPR available on? Personal residences
• What relief is available?
- 100%
• What if house is only a PPR for part of the ownership period
- Time apportioned, but
- Certain periods of non occupation are deemed to be
occupied:
- First 3 years, last 3 years, periods spent working
away
- Complicated –seek advice

20. 1. CGT and PPR
Partial lettings exemption
• What is partial lettings exemption available on?
- Personal residences subsequently let
• What relief is available? Max of:
• £40,000, or
• PPR claim or
• The remaining gain
• Therefore, there are tax advantages to living in a
property before letting it out!

21. 2. Expenses vs. Improvements
Expenses:
• Are deducted from Income to arrive at taxable profits –
Income Tax or Corporation Tax
Improvements:
• Are deducted from proceeds to arrive at chargeable gains
– CGT or Corporation Tax
Maximising Expenses:
“Wholly and Exclusively” – you cannot deduct an
expense that is used partly for the property unless the
property portion of that mixed use is separately
identifiable.

22. Expenses vs. Improvements
STRUCTURAL COSTS
You can claim for any costs which “prevent the property
from deteriorating” but NOT for improvements
• Allowable Structural Costs
– Painting: exterior and interior
– Damp and rot treatment
– Re-pointing
– Roof repairs including replacing roof slates, flashing &
guttering
– Mending broken windows
– Replacing single glazed windows with double glazing
– New loft or cavity wall insulation up to £1,500 per
property but provided its already let.

23. 2. Expenses vs. Improvements
Allowable Structural Costs
• Repairs to goods supplied with the property (eg
washing machine)
• Replacing like for like on an existing let
property
– radiators
– light fittings
– kitchen units
– baths, wash basins & toilets

24. 2. Expenses vs. Improvements
• Furniture and Fittings
10% Wear and tear allowance of rents received after
deducting charges normally paid for by the tenant
OR
Renewals basis
But can only use 1 method for your whole portfolio
and you CANNOT change methods year on year!

25. 3. Using Intermediaries
Useful strategy for higher rate tax payers
Rent your property to your own letting agency and effectively
divert your profits into an entity that pays a lower rate of tax!
Pay 50% or 20%?
On £10,000 annual profits = £3,000 tax savings!

26. 4. Utilising Interest
Interest on the mortgage of the investment property but
NOT the capital element
Interest on the mortgage of your own home
Interest on the re-mortgage of your investment
property
 up to the value of property when first let
Interest on personal loans
Finance agreements
Interest on credit cards

27. 5. Stamp Duty Avoidance
Recent budget had a MASSIVE impact on SDLT strategies
Strategies may be dead but planning is very much alive
Strategy vs. Planning? DOTAS?
Charles Group currently works with the UK’s leading experts
on SDLT.
Currently we have a planning opportunity that is NOT
aggressive, acceptable by all banks, acceptable by solicitors
and cannot be deemed a tax strategy. Therefore there is no
requirement to notify HMRC
Planning is based on banking law that has been in existence
for over 150 years.
The planning is based on the nature of the transaction. Ask
to see if we can help you.

28. 6. Capital Allowances
• Usually only available for Commercial
Property.
• In certain circumstances CAs can be used
for properties with communal facilities
such as HMOs!
• Can increase allowable expenses by
£100K per property owner!
• Affects loss relief!

29. 7. Appoint a Quality Tax Advisor
If you are serious about property investing then you
need to focus on building your power team:
Tax accountant
Mortgage broker
Solicitor
Mentor
Builder and decorator
Electrician
Plumber

30. 7. Appoint a Quality Tax Advisor
To learn more about me and to join my network:
Web: www.charlesfcca.com
Email: ncharles@charlesfcca.com
Tel: 020 7263 3295
• Facebook
• Linkedin
• Youtube: TNCharles
• Twitter: TNCharles

31. WITH ACTION COMES RESULTS
A conversation with me could save you
and
your businesses THOUSANDS OF £s