Beware new associated person rules

The new associated persons (AP) rules generally will be effective from the 2010/11 tax year. They introduce major changes in the area of land sales.
We have dealt with one case already and agree with the tax consult advice that for most taxpayers the avoidance of association has now become so difficult (read complex and expensive?) that it’s probably not worth the effort. What becomes important therefore is managing the AP risks and being aware of the pitfalls to minimise exposure. For instance, holding properties for at least 10 years has become increasingly critical.
The case we’ve been involved with already concerned a taxpayer having a family trust which in turn had a rental property portfolio. The taxpayer was looking to do a small land development project in a company. The single biggest concern for him would be to avoid doing major improvements to any of the trust’s rental properties while the company development was underway. Doing so could taint the improved rental property. To avoid the tainting, he would have to ensure he didn’t sell the property within 10 years of the trust acquiring it. Probably not an issue in this case, but events might conspire to make it so!
Please give us a call when you start THINKING about any land development project, before you START it, to ensure that all potential impacts are considered and risks reduced as much as possible.