property dilema

property dilema

Didn't find your answer?

The case of Sharkey v Wernher established the principle that stock taken for own use or disposed of otherwise than by sale in the normal course of trade should be treated as if it were a sale at market value.

The principle is not applicable to sales or purchases by way of trade even though the transaction may not be at arm’s length.

My client is a controlling shareholder / director of a small property development company that develops and sells one residential property at a time.

Last year a property was developed at a total cost of £185,000 and did not sell for its marketed price of £215,000 for six months. It could be argued that the market value was £200,000.

In order to free up sufficient funds to purchase the next property for development the director agreed to personally acquire the first property at cost.

Is this a sale by way of trade and therefore no uplift is required in the company’s tax return?

Even if there is no uplift, presumably a benefit in kind will be payable by the director on the difference between the market value and the cost?

stormrider

Replies (3)

Please login or register to join the discussion.

avatar
By User deleted
17th May 2008 10:13

S v W : companies ?
There is an assumption here as to which I am a mite leary. I do not think it is writ on tablets of stone that the S v W judgement applies to corporate bodies. In my view, the property comes out at cost--in essence the employer is providing a benefit to an employee - and
the latter faces a taxable benfit on the lines you give.

Thanks (0)
avatar
By User deleted
16th May 2008 17:11

Hmmm
Thanks Denedin!

My client has a bundle of 'commercial' evidence to show that the property was purchased at market price including a document showing another house in the same street for sale at that price, so... I have advised of the risks and there is full disclosure in the accounts.....

Watch this space!

Thanks (0)
avatar
By User deleted
16th May 2008 14:14

Helpful article
Stromrider might wish to look at Keith Gordon’s article in Taxation on 1 May concerning Sharkey v Wernher

Thanks (0)