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Extreme Mewing - Btl Cautionary Tale

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Somene I know of its in a bit of a rock and hard place regarding a BTL portfolio and mewing. And before you ask its not me :) My only personal luxury in years was buying a new car for the first time recently.

This person is looking to liquidate their whole porfolio after having a BIG negative cash flow for some months due to various reasons mostly relating to not actively managing properties themselves. When it is sold there will be a big capital gains tax liability to be paid....however most of the extra value of the portfolio has all been mewed already on personal non-assets instead of being put aside so this will leave a huge bill with only a fairly well paid job to fund it. Thing was future deals and mewing was to fund the old stuff but cash flow problems are too bad now to go that route probably although more lending is available. The tax bill will be at least around 400-500K with no profit on the sale(just will clear the debt) and there is virtually no equity available on the principal residence. Leaves only a fairly good city job to fund all this. Thing was without all the mewing on personal stuff things would have bene just fine.

So the question to both bulls and bears is are there any options to reduce the tax damage ?

Edited by mercsl

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(Edit: just noticed that TTRTR has already outlined what I've just said)

As I understand it (but I'm not an accountant) the person could take up foreign residence, in a country where Capital Gains aren't taxed. Some countries, I believe, won't tax assets that have been held for over a year (Germany?). There was a loop-hole regarding countries such as Belgium and double taxation (Belgium doesn't have CGT, I think), but I gather that this has been closed. To avoid CGT, I believe the person will have to move in the tax year before they sell - if you sell assets in the same tax year as you move the IR will want tax. So move before April 6, get the paperwork sorted out, then sell in April 6 or afterwards - which means there's no harm in putting the property on the market now. Then stay out of the UK for at least five years.

It's unfortunate that the proceeds of the sale are needs to a pay off debts - otherwise I think you can avoid CGT by putting the proceeds in a Venture Capital Trust.

Maybe the person in question could give the properties to their spouse (I believe no CGT on this disposal), and their spouse could leave the country before April 6? Spouse would then have to go to a country with no CGT on property. I may be wrong, but if the gift took place after the spouse had officially changed residence, but before the end of the tax year, the spouse would not neccessarily have to stay out of the country for five years. Of course you would still have to establish with the IR that the change of residence is genuine. Professional advice needed!

Edited by Scipio_Africanus

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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