Jon Dawson
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Shared Ownership

Shared Ownership

My client owns a farm and is about to undertake some work with another local farm. To undertake this work they have decided to purchase a tractor for £6000 plus VAT. The cost is to be split half and half. I am unsure how to deal with this in terms of who 'owns' the tractor and who claims the VAT etc. Would it be possible for 'A' to own the tractor and for 'B' to have loaned the £3000 to A, the loan then sitting in the balance sheet?Presumably ongoing maintenance costs would have to be done via a gentleman's agreement, with A invoicing B for half of the costs?

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11th Apr 2012 12:24

It's a tractor of two halves

Just because the two halves happen to be connected together, it's perfectly possible for each of the farmers to own half the tractor.  It's just as possible for the supplier of the tractor to make a supply of half a tractor to each of them for VAT purposes.

It's also possible for the supplier to supply the whole tractor to one of them, who then makes an onward supply of half of the tractor to the other.

For capital allowances purposes each can claim on their expenditure in the shared asset.

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Marion Hayes
11th Apr 2012 14:08

Thanks Steve, but what happens when one of the parties decides to sell their half? Or is it possible to put some form of agreement in place to stop that happening?

 

Jon

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11th Apr 2012 15:11

Seems a bad idea

Why do clients insist on painting themselves into corners?

Anyone can see that this will doubtless end in tears. Would it not be best that one party buys the equipment then charges the other for the use of it when required?

Not ideal admittedly and there will be capital allowances and VAT implications but it will at least head of the inevitable falling out. 

 

 

 

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Tim Vane
11th Apr 2012 15:16

I am inclined to agree, but unfortunately that is not how my client wants to play it.

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11th Apr 2012 15:27

On their own heads then

I would imagine that to get any meaningful agreement drawn up, you will be looking at a custom job from a solicitor (no insert <NAME> here) and will likely be looking at the thick end of £500.

Will they not listen to your recommendation otherwise?

 

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[email protected]
11th Apr 2012 15:41

Having thought further about it the sale of two halves might work if when one party decides to sell they are obliged to buy out the other. That would be quite a straightforward contract I would have thought.

The problem with leasing it out to the other party is knowing what to charge and may also throw up it's own issues surrounding when the lessee can and can't use it.

 

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11th Apr 2012 15:54

Marriage is a bad idea...

... it can only end in tears.

It's not ideal, but each party to the arrangement is putting up half of the funds, so it's not unreasonable for them to expect to own half of the asset, having done so.

They're bargaining on equal terms, so if push were to come to shove in a court, any agreement they choose to enter into (hopefully evidenced in writing) would be upheld by a court on that basis. For a £3,000 share in a tractor though, it's not going to get to court.

Two counterparts of a document, signed by both of them, acknowledging that the tractor is owned by them in equal shares and can only be sold by both of them selling together or one of them selling their share to the other. Each then keeps one counterpart. I can't see that requiring legal input.

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