I prepare a client's annual Company Accounts for whom getting the information to me is always a chore for the sole director and as such, there is always a penalty from both Companies House and HMRC for late submissions. Not only have I receievd last years Acounts information late, I have also discovered the following -
The Company consists of four let properties, all worth in the region of £100k. During the last trading year, one of these properties has been sold and whilst at first glance, I thought no problem, I have now discoverd that it was sold to the sole director and worse still, not at market value.
My initial understanding of this scenario is that legally, this should not have been allowed. Surely, by selling the asset at less than market value, the director is placing a 'strain' on the Compnay itself. Had the sale been at market value then completing the late Accounts would have been a tad easier however, I would appreciate any readers comments as to how to appraoch the director of the Company concerning this matter and any tips on the tax implications based thereon ?
Thank you.
Replies (5)
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Sorry for not answering your question but asking a similar question out of my own selfish interest.
1) How did you determine the market value? Property value is fairly subjective these days.
2) Would this client of yours have any problem if the company sold the property at historical cost? Let's say which would probably slightly less than perceived market value? As far as I understand there's no real authority to say what real market value is, they are all fairly subjective.
Thanks,
Z
Has it happened legally? Was a SDLT return dealt with? Legally conveyed?
Tax implications, overdrawn DLA for monies owed.?? Or remuneration.
I had a case once where we treated the transfer as a BIK to the directors and then claimed P&L deduction for the company. HMRC opened enquiry and said we were claimed relief for a capital loss but as it was a voted BIK (board minutes etc) then it was remuneration and so CT relief given.
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the company will need to bring in the MV of the property and pay corp tax accordingly if there is a gain.
the individual will either be taxed as a dividend on the distribution from the company of the asset.
or.
the individual will be subject to income tax on the value drawn from the company as BIK.
or.
it may be that the director can arrange to repay the copmany for the balance. this will create s455 issues and p11d entries.
the tax treatment depends on whether he took the property in his role as shareholder or by reason of his employment. I would say that the equity should be treated as a distribution.
No SDLT based on values given.