"We've already exchanged contracts..."
There are a few phrases that immediately make me pause during a telephone call.
One of them is:
"Jonathan, we've already exchanged contracts..."
Sometimes it's the sale of a rental property.
Sometimes it's a piece of development land.
Sometimes it's a family business that's been sold or a trust that's been restructured.
Whatever the circumstances, my next thought is always the same:
"I wish we'd had this conversation a little earlier."
Please don't misunderstand me.
I'm not saying every problem can be solved by taking advice before a transaction.
Sometimes the tax outcome would have been exactly the same.
However, having the conversation early usually gives you choices.
Once contracts have been exchanged, many of those choices have disappeared.
Over the years, I've found that it's rarely the complexity of the tax rules that causes problems.
More often, it's simply the timing.
Here are some of the situations where I most often hear those words.
1. Selling a rental property
A client has agreed the sale.
Contracts have been exchanged.
Only then does someone ask about Capital Gains Tax.
By that stage, there may be little opportunity to review ownership structures or consider planning that could have been explored beforehand.
2. Selling part of a garden
A developer makes an attractive offer.
The paperwork moves quickly.
Only later does the question arise:
"Will I pay Capital Gains Tax?"
The answer may involve much more than simply calculating a gain.
3. Making substantial lifetime gifts
Parents decide to transfer assets to their children.
The paperwork has already been completed.
Only afterwards do questions arise about Inheritance Tax or other tax implications.
Early advice often provides much greater certainty.
4. Restructuring a trust
Trustees make important decisions for entirely sensible reasons.
Only afterwards does someone wonder whether there are tax consequences.
Sometimes there are.
Sometimes there aren't.
The important point is understanding the position before decisions are implemented.
5. Selling development land
Property developers and landowners often focus quite naturally on planning permission, legal documentation and the sale price.
Tax is sometimes considered much later.
Yet the tax position can influence important commercial decisions made at the very beginning of the project.
Jonathan's Tip
One of the simplest questions you can ask before signing anything is:
"Is there anything from a tax perspective that I should think about before I proceed?"
Even if the answer is "No", you've bought yourself peace of mind.
If the answer is "Yes", you've given yourself the opportunity to consider your options while they're still available.
A final thought
One thing I've learnt during my career is that clients rarely regret asking for advice too early.
They sometimes regret asking a little too late.
If you're about to make an important financial decision, whether that's selling property, restructuring a trust or transferring assets to family members, don't be afraid to ask the question before signing the paperwork.
It may simply confirm you're doing exactly the right thing.
Or it may be the conversation that saves you a great deal of time, uncertainty and unnecessary tax later.
Further reading
Capital Gains Tax on Property in the UK: Rules Many Owners Misunderstand
Selling Part of Your Garden or Land: When Capital Gains Tax Applies
Trust Taxation Explained: The Key Issues Trustees Should Understand
How we can help
At Tax Matters, we regularly advise clients before and after important transactions involving property, land, trusts and family wealth.
Where advice is sought early, we can help review the tax position before decisions become legally binding.
Where contracts have already been exchanged or a transaction has completed, there may still be reporting requirements, calculations or HMRC matters that need to be dealt with correctly.
Our work may include:
reviewing the tax implications of a transaction
calculating Capital Gains Tax liabilities
considering available reliefs and allowable costs
advising on trust or inheritance tax consequences
assisting with HMRC reporting and correspondence
Even where planning opportunities have passed, understanding the position clearly can still help prevent further problems.
A final thought
Hearing the words “We’ve already exchanged contracts” does not necessarily mean that everything has gone wrong.
It simply means the conversation has started later than it ideally would have done.
There may still be important steps to take, particularly where tax must be calculated, reported and paid within a specific deadline.
However, where possible, the better approach is always to ask the tax question before signing the paperwork.
A short conversation at the right stage can provide certainty, highlight issues that may otherwise be missed and help you make an informed decision before becoming legally committed.
If you are considering selling property, land or another valuable asset, my team and I would be pleased to discuss the tax position before you proceed.
