Credit Default Swaps - Rental income...

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    #46
    Your contributions are very welcome, as are you.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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      #47
      Originally posted by BikerJoe View Post
      Basically Ive gained nothing from this forum that i didn't already know, or haven't already been told by my squeaky clean, arse covering accountant. No creating thinking, no interesting debates, no ideas to take away and explore, absolutely nothing to inspired me at all.
      OK. How's this for creating thinking?

      Go to Switzerland. Find someone just about to die and ask them to settle 1Sfr on trust for you (discretionary trust with no protector and no life interest and any two local professionals you trust as trustee). Then do the same in another country. It can be Euros rather than SFRs. Don't choose Panama or Berlize as it makes people suspicious. Don't choose Lux for obvious reasons. Make sure they aren't British and they they do actually die (try not to help that bit yourself or tax won't be your biggest issue). Get the first trust to set up three companies in a different jurisdiction - these will be the GPs. And be creative with the names. Don't use BikerJoe 1 Limited, BikerJoe2 Limited, etc. The second trust sets up another company (say Jersey, Bermuda or somewhere like Malta, just don't choose Scotland). You'll have to find some individuals you trust a bit to be the directors. Then get the second trust to borrow from a bank and use that cash to invest in an SCSp (TopLP). The company that was set up by the second trust will be the other investor using the nominal Euro that was settled for its share capital. TopLP then invests in a second SCSp (BottomLP). That second SCSP has a different GP to TopLP. As well as TopLP being an investor the third SCSp (WifeCarryLP) gets a carried interest. Again, WifeCarryLP will need the third company that the first trust set up as GP. DON'T SHORT CUT THIS STEP. BottomLP will then set up a Dutch cooperatief (at least that's my view, some people would prefer to have a Scottish LP but that seems a bit untested - others prefer a charity that is a CLG but to me that starts to smell too much). The Dutch coop borrows the remaining money from the bank. The combined funds are then used to pay the purchase price of the Cayman company that typically owns property in the UK (if it is a Panamanian company don't touch it with a barge pole). By completing the contract with the vendor outside the UK you will be in a better position to do base cost shift with the BottomLP and that will give you no capital gain on the disposal in France (via WifeCarryLP - assuming that you manage not to be a direct lending fund for IBCI). In the meantime the banks can be repaid using gross income that suffers a very low rate of tax (maybe 15% after a few year, or perhaps less). There are somethings that you need to watch out for (e.g. make sure neither you nor anyone connected with you is a director otherwise s421B(3) will deem all the interests in the SCSps as ERS). Definitely don't want to go there. Also you need to make sure that you are not the settlor of either trust (especially the second) so don't do anything that could be taken as giving either of the settlors any element of bounty (so don't buy them coffee or anything). And when WifeCarryLP gets the distributions make sure that you are not resident and not working in the UK, and that there is no way either the two SCSPs in the chain could be said to be a direct lending fund (the coop doesn't seem to be a CIS so that would be fine) as even if the carry is conditionally exempt, you will still pay DIMF. Oh, forgot to say that you need to be IUMV for the interest in WifeCarryLP just in case there is an ERS issue in that quarter. Ideally, there will be multiple properties acquired so that you have another fall back of being compliant under the 1989 MoU with the BVCA (and IR, as was).

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        #48
        Lol, you have far too much time on your hands!!

        Comment


          #49
          What a wonderful response Muggsy, I have read it three times and chuckled on each occasion

          Comment


            #50
            It missed out the final stage, "buy BHS".
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #51
              Originally posted by BikerJoe View Post
              As we know, with the new tax changes, mortgage interest cant be offset, but other expenses like insurance etc can be.
              So it got me thinking. Could i sell the risk of a tenant defaulting? Kind of like a credit default swap and offset the costs against tax?

              The way i see it working is i have a tenant who might default, i'm exposed to risk, so i purchase a CDS from my own Ltd company (which i already have as i'm a self employed IT consultant).
              The risk of a non-paying is then transferred to my Ltd company so i'm guaranteed the rental income, but i should be able to then offset the cost of the CDS against the rental profits thus reducing my tax bills.
              The company only pays 20% corp tax and i price the CDS so as to minimize rental profits.

              it sounds too simple??
              Yes, it sounds too simple because the CDS is not an allowable expense against rental income.

              The tax return for reporting income from property is the SA105 and nowhere in the SA105 Notes does it say CDS is an allowable expense.

              Comment

              Latest Activity

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              • Caught out by changes to Capital Gains Tax
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                I appreciate 'ignorance' is no excuse, however there are some mitigating factors, i.e. due to illness etc.

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                06-12-2021, 13:51 PM
              • Reply to Caught out by changes to Capital Gains Tax
                by reluctantlandlord1976
                Thank you Gordon, didn't see your response this afternoon. I will look at this with fresh eyes tomorrow as it's late now.
                I've put some figures in my reply to a post just now but answers below to your questions.

                a] £80k Jan 2021 sale price.
                b] As property purchased before...
                08-12-2021, 00:55 AM
              • Reply to Caught out by changes to Capital Gains Tax
                by reluctantlandlord1976
                Andrew, apologies only just seen your post [was it awaiting approval did you say?] answers are:

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                08-12-2021, 00:41 AM
              • Reply to Caught out by changes to Capital Gains Tax
                by reluctantlandlord1976
                JP Keates
                I wasn't aware that refurbishment deductions only applied in terms of letting out the property. On the CGT calculator it asked 'How much have you spent on improvements since you became the property owner'.....

                Here's the timeline:

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                07-12-2021, 18:01 PM
              • Reply to Caught out by changes to Capital Gains Tax
                by reluctantlandlord1976
                JP Keates et al - thank you very much for your assistance. I have this afternoon emailed an accountant to try and get an appointment urgently. I hadn't realised it was all so complicated and it was remiss of me to not be aware of the CGT changes made in 2020 due to not renting out the property. Thanks...
                07-12-2021, 17:28 PM
              • Reply to Caught out by changes to Capital Gains Tax
                by jpkeates
                Refurbishment while you were living there is only allowable against CGT if it was solely and exclusively for the business, so if it was to prepare the property to be let, it would be OK.
                If it was simply to improve what was then your home, it fails the basic test.

                Get yourself to...
                07-12-2021, 16:22 PM
              • Reply to Caught out by changes to Capital Gains Tax
                by AndrewDod
                The probate resets a lot of the stuff, but my main response was unapproved
                07-12-2021, 15:36 PM
              • Reply to Caught out by changes to Capital Gains Tax
                by AndrewDod
                You are really short on detail:

                Date (year & month) bought in joint names ______ (what % was yours then)
                Date it converted to your sole name ______ (presumable date of death of parent 2?)
                Declared vale at probate _________
                Capital expenses between date of probate 2...
                07-12-2021, 15:33 PM
              • Reply to Caught out by changes to Capital Gains Tax
                by reluctantlandlord1976
                We were all joint owners. Bought it with parents. I lived there for 10 years before buying own home. I became sole owner upon their deaths. Rented out since 2007-2019. Empty last two year as trying to sell. Hence I was off the landlord radar. I am now extremely worried by your statement that refurbishment...
                07-12-2021, 14:53 PM
              • Reply to Caught out by changes to Capital Gains Tax
                by AndrewDod
                Let us know the exact timescale and money involved year by year - I am sure some kind person (or even myself) with do a calculation for you so that you can assess the risks involved
                07-12-2021, 14:33 PM
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