Pay No Property Tax Newsletter
Hi
Welcome to the August 2004 newsletter.
In this newsletter I'll be telling you how best to choose an estate agent if you are buying or selling a property.
Also, our property tax guru, Ian McTernan tells you about some new money laundering regulations that have come into effect - this is MUST KNOW information for every property investor.
As always we have your property tax questions answered by our tax specialists.
We will also be giving you further details about the forthcoming property Investor Show, which we will be attending.
So, let's get cracking with this newsletter.
Good look in your investment projects for 2004!
Amer Siddiq Pay No Property Tax Newsletter Editor Email: amer@property-tax-portal.co.uk Contents:
- Property Investment Tip
- Be careful when choosing estate agents! - Property Investor Show - Come along to my seminars.
- Tax Tip: Beware of the new MONEY LAUNDERING REGULATIONS
- The PROPERTY TAX gurus answer your questions!
- Should I declare my rental losses?
- How can I avoid Inheritance Tax? - Feedback and Comments
- Be careful when choosing a estate agents! Buy from the RIGHT agent!
Ever thought whilst browsing through your local property paper that 'the price seems quite high'?
Well the chances are that if you have had this thought then the property probably is overpriced.
In every town and city there are estate agents who continue to overprice properties.
Though this may have worked over the last couple of years, when property prices were steaming ahead, it will definitely NOT work now.
So, if you manage to buy a property at a 15% discount from the highest pricing estate agent in your area then the chances are that you have ONLY bought a property at its REAL market value.
Yes that's RIGHT - You have NOT really got it a discount.
So it is crucial that if you want to buy TRUE discounted property then you MUST buy it from an agent who will have a property on the market at its true market value.
Here is what you need to do, to make sure you are not buying at an artificially inflated price:
- Research (yes, this as always is key) the area, and
see what the 'average' price is for the area.
This means that you need to find comparable properties with different estate agents in the area.
If you can't find comparable properties then try using the following websites:
>>> www.upmystreet.com
>>> www.landreg.gov.uk
They will give you a very good indication of what property prices have been selling for in a particular location. - Identify the estate agents that have a reputation for
overpricing and AVOID them like the plague.
Don't listen to their justification of why the property has been priced this way. Be your own judge.
In my experience there is a direct relationship between property prices and estate agents fees. The higher the price, then the higher the fee.
Therefore you can see why agents are still inflating prices - to increase their own profits!
This is especially the case if you are sitting on substantial gains and are getting nervous about the UK property market.
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If you are considering selling then make sure you know your capital Gains Tax Liability before you sell.
Visit:
>>> www.property-tax-portal.co.uk/property_tax_calculator.shtml
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So, if you are contemplating putting your property on the market then consider the following�.
What every estate agents wants is YOUR business, and what is the best way to get your property on to their books, than to boost your ego, by OVERVALUING your property.
Think about it, you have your property valued by three agents and the price varies from £160,000 to £180,000.
Which agent will you want to put your property on the market with?
In 99% of cases it will be the one that valued it at £180,00, as after all they will give you the biggest profits.
WRONG!
Like I say, this may have been true over the last 2 years, but it is just NOT working now.
So, if you are contemplating selling a property then the most important factor for YOU is that it sells quickly and at as high a price as possible.
Therefore market it competitively, so that is attracts interest.
The last thing you want is to get stuck in a RUT where, you have a lack of interest and then have to start decreasing the prices due to an originally inflated price.
Here are some quick tips for you:
- Follow the points I mentioned in a) and b) above :-).
- Make sure you have the property valued by a number of
different agents, and look for SOLID PROOF that they
have sold in the area where your property is.
If they have not sold property in your area, then it is likely they will price your property based on a different location, which is just like comparing APPLES with BANANAS - It doesn't work!
So if they have no proof, then be very reluctant to advertise with them. - Don't let them boost your EGO.
Yes, flattery does get (most) people everything, but don't forget, their job is to win your business, so don't get sucked in by their favourable comments.
If you really want them to impress you then ask 'what is your average turnaround time for selling properties in this area.' Again ask for proof! - Take your time.
Don't be rushed into believing that you have to sign a contract quickly.
Assess the different offers, compare the rates and ask yourself how much you would be prepared to pay for the property. - Negotiate!
The agents won't tell you this, but most are open to negotiation, both in terms of agency fees and the lock-in period.
Normally an agency will ask you to sign a clause which states that you cannot advertise with another agency for a period of 6 months.
This is also known as a sole agency agreement.
Now if the agency is REAL GOOD and has confidence in itself then they will reduce this to 10 weeks. This means that if they have not agreed a sale on your property then you can start speaking to other agencies.
You can be assured that they won't want to lose your business so will be trying they very best to sell your property within the 10 weeks!
Here are the details of the show:
Event: Property Investor Show - South Location: ExCel Centre, London Docklands Date: Friday 17th to Sunday 19th September
We will be at stand number 935, so book mark this stand now and make sure that you visit us.
It really will be great to meet you.
Our tax specialists will also be at hand to answer your tax questions.
We have pre purchased a number of admission tickets and would like to invite you as our guest.
If you are available on 17 - 19th September visit the registration section via:
>> http://www.propertyinvestor.co.uk/register.asp
and use our PROMOTIONAL CODE A151578. This will give you free entry into the Exhibition.'
Also if you want to attend any of my seminars then here are the details:
Title: How to Pay Less Property Tax - 7 Tax Busting Strategies!
Date/Time:
- Friday 17th September - 16:45
- Sunday 19th September - 10:45
Don't be late in booking as seminars on property and tax do get booked up extremely quickly.
Se you there, it's going to be great fun :-)
3. Tax Tip: Beware of the new MONEY LAUNDERING REGULATIONS Our tax specialist Ian McTernan explains the new Money Laundering Regulations that have come into force as of 1st March 2004.
Under the regulations, any tax evasion is deemed to be a money laundering offence.
For the first time accountants, tax consultants and other professional advisers including estate agents are brought into the net of those legally obliged to report any suspected case of money laundering to the National Criminal Intelligence Service (NCIS).
Tax evasion is deemed to include any omission of any income or gains from a Tax Return or failure to report any transaction which may give rise to a gain. Typically for property investors this will include not declaring rental income or not declaring the sale of a property.
Now for the real sting - the professional adviser must make a report to the NCIS as soon as he becomes aware of any offence.
A good example of this is when a new client comes along and says he hasn't declared his income for several years from his properties, but now wants to make a voluntary declaration to the Revenue. In this scenario the adviser must inform the NCIS of this and he/she is specifically banned by law from telling the client that such a report has been made.
This is regardless of whether the client asks if such a report has been filed. If the adviser fails to file the report then he/she will face prosecution!
Of course, the NCIS will pass the report to the Inland Revenue for action and before long the client will find himself subject to a full scale Revenue investigation.
Under these new rules, it will also be necessary to submit a letter to the Revenue advising them that the client will be making a voluntary declaration in the near future.
This needs to be submitted as soon as contact is made with the client in order to make sure that the Revenue do not come down too heavily on the client. The rules surrounding a voluntary declaration are more advantageous than a Revenue investigation!
Consider the following case study:
William comes to McTernan Associates Ltd for a reference for his mortgage company. They have insisted that he has an accountant's reference before they will grant him a mortgage.
William has not previously declared his rental income as he feels he is making a loss overall.
Under the Money Laundering Regulations he has committed an offence and any professional is under an obligation to make a report to the NCIS without being able to tell the client that he has done so.
Imagine William's surprise when he gets a letter from the Revenue opening an investigation into his affairs!
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The above case study demonstrates how the government and the Inland Revenue are working proactively to prevent money laundering and other methods of tax avoidance.
Therefore, it is best to keep on top of you tax matters right from the OUTSET!
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*** TESTIMONIAL ***
I've been dealing in property for 35 years. Over the years I have asked various accountants for advice and guidance. I have read all of the advice in 27 Proven Property Tax Saving Strategies and I have learned more in two days than in 35 years.....Paul Goulder (email).
*** END of TESTIMONIAL ***
4. The PROPERTY TAX GURUS answer your questions. What better way to get fr'ee tax consultancy than through this newsletter?
Your questions are answered by property tax experts Arthur Weller and Ian McTernan.
Here are this months selected questions answered by Ian and Arthur.
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SHOULD I DECLARE MY RENTAL LOSSES?
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Q. Last year I purchased two investment properties. However I am currently making a loss on them as I have a low yield and the expenses are greater than the income. Should I declare this loss to the Inland Revenue?
What happens if I don't declare the loss?
Ian says:
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You have an obligation to report a new source of income to the Inland Revenue by 6 October following the year in which the source of income first arose.
Assuming that the income first arose in 2003/04, you have until 6 October 2004 to report this source of income to the Revenue and until 31 January 2005 to file a tax return showing the income and expenditure for the year.
It is always a good idea to declare the loss as this can be carried forward and used against future profits of the rental 'business', whether this be the same or different properties.
If you do not declare the loss and start making profits several years later and then declare the profit, you will lose out on being able to offset the losses against the profits and hence will pay more tax.
Also, if the Revenue discovers that you have had rental income then you may find it difficult to prove several years later that the expenses were as high as you say they are unless you have kept full records.
Therefore you may end up paying tax, interest and penalties on a profit that you never incurred.
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HOW CAN I AVOID INHERITANCE TAX?
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Q. How can I plan to avoid inheritance tax?
Arthur says:
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The single most cost-effective way to avoid IHT is to give away assets and hope to survive for seven years.
However most people don't wish to do so for three reasons:
- they still want to benefit from the assets themselves,
- they don't trust the recipients, and
- a capital gain can often be triggered when gifting assets.
Another effective way of avoiding IHT is to covert one's property into qualifying business assets, that are 100% exempt from IHT.
These are basically an interest in a trade (a sole trade or a partnership) or shares in a trading company that have been owned for two years.
However investments and shares in an investment company do not qualify.
A similar 100% exemption applies to qualifying agricultural property.
A not so commonly known method of avoidance is relevant to people with large amounts of regular annual income, some of which they don't use.
If they get into the habit of giving away a proportion of their income every year, while still maintaining their normal lifestyle, then even if they don't survive for seven years, this will fall out of their IHT computation.
**** New tax Guide - Coming Soon ****
Our tax specialists are currently busy writing a new guide:
PAY NO INHERITANCE TAX
To be notified when this guide is launched please send a blank email to secretsofiht@qt-pro.com
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Your tax questions answered for free online!
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If you want to put a question to either Ian or Arthur, for consideration in this newsletter then please submit it via the following link:
http://http://www.property-tax-portal.co.uk/ask_question.shtml
REMEMBER, questions MUST reach us no later than 14th September.
We can't promise that all questions will be answered so we will select and answer those which we believe will provide the biggest benefit to our subscribers.
5. Feedback and Comments I welcome your comments, feedback and suggestions for the newsletter.
Also, if you would like to contribute to the newsletter i.e. share your experiences, ideas, tips etc with the newsletter subscribers then please email me at:
amer@property-tax-portal.co.uk
It really would be GREAT to hear from you :-)
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That is it for this newsletter, see you in SEPTEMBER .
All the best
Amer Siddiq amer@property-tax-portal.co.uk
P.S Please feel free to distribute this email and send it to anybody who you feel will benefit from this tax saving strategy.
(C) 2003 Amer Siddiq & Tax Portal Limited
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