Government expands small loan scheme
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In the last couple of weeks, Inland Revenue have sent out letters to taxpayers who may have sold properties subject to the residential bright-line test.
With changes in legislation over the last few years requiring IRD numbers to be supplied with all property transactions, it is considerably easier for Inland Revenue to match property transactions with taxpayers and then to review the returns to determine if bright-line income has been included in the return.
If you have purchased a property and then resold it within the bright-line period (either two years where the purchase took place between 1 October 2015 and 29 March 2018 or five years where the purchase took place after 30 March 2018), then expect to be contacted by Inland Revenue. Being contacted by Inland Revenue does not necessarily mean that your property sale was subject to the residential bright-line test, and we recommend discussing further with your Baker Tilly Staples Rodway advisor if you receive correspondence. For instance, if you occupied the property as your main home for the majority of the time you owned it, then it should not generally be subject to the bright-line test.
Note there are a number of triggers for the bright-line period, and this can include restructuring. Given the number of family trusts being restructured in light of the Trusts Act 2019, care must be taken to prevent inadvertently triggering tax obligations under the bright-line test should a restructure occur followed by a subsequent sale within the relevant bright-line period.
If you have any questions in relation to the residential bright-line test, please contact your Baker Tilly Staples Rodway advisor.
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