I have just completed on a UK new build where the developer offered a significant cashback payment payable post-completion. It has been described in the paperwork as a profit share arrangement.

Are there any tax implications on receiving such a payment, i.e. CGT or Income Tax?

Hello

I am not an accountant nor a financial advisor, but there have been various articles in the media on this type of scheme recently - and mainly because HMRC have been paying very close attention to them and have tried to close the various loopholes that developers attempt to use (or is that 'abuse')?

Anyway, as I understand it, the way HMRC approach them is like this ... if a property is £200,000 and there is a 5% cashback on completion offer, the property is viewed for its CGT liability at £190,000. However, the 5% cashback can be considered by HMRC as income generated through the property - and could therefore be taxable (as an element of annual income tax liability).

I would tend to prepare for the worst case scenario AND (given the current climate where HMRC are targeting property investors with severe penalties for non-disclosure) I would also speak to your local tax inspectorate and/or a tax advisor about the deal.

Regards

Tony Booth

Tony,

Thanks for the feedback.

Cheers,

Adrian.