A friend owns a cottage on a plot of land in Coventry. He bought it 10 years ago for £540,000. I am paying to demolish the cottage and build a house with two flats on the plot at a cost of approximately £500,000, both flats being worth approximately £700,000 when finished. What is the best way to structure the deal/timings to minimise stamp duty land tax (SDLT) and capital gains tax (CGT)? 

Arthur Weller replies:  

You are probably better off purchasing this land and cottage, doing the development, and eventually selling the two flats through the ownership of a limited company. The reason is that if you do this personally there will probably be a lot of income tax, plus Class 4 National Insurance contributions, for you to pay, whereas in the company the profits will only be subject to (currently) 19% corporation tax. Since I presume you are planning on selling the two flats when completed, CGT does not come in here. If you already own a residential property (e.g. your own home), whether you personally buy the land and cottage or purchase through a company, the purchase will be subject to the extra 3% SDLT charge.