Help! What relief is available?

Help! What relief is available?

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I have a client that runs a car selling business through a company he owns. It operates from a row of 9 shops. The company owns 3 shops and 6 shops are owned by him personally. He wishes to change this position so the company owns all of the 9 shops. The 6 owned personally were bought in the 1960's and the relevant 1982 valuation for each shop is £20,000 and the current market value is £150,000. What reliefs are available to him to do the above?

Replies (22)

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Portia profile image
By Portia Nina Levin
22nd Jul 2015 13:54

I would suggest

That your client might avail himself of donottellhmrc relief.

I can also make large buildings invisible on request.

Thanks (3)
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By cparker87
22nd Jul 2015 14:15

Gift Relief

May well be in point; have a look at s165 TCGA 1992. 

You should fully explore why the assets are to be transferred to the company though. Where is it going? Is he selling the company? Are you looking to secure 100% BPR handing it down? 

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By Imara Group
22nd Jul 2015 14:21

Hello cparker87, yes the reason is to secure 100% BPR as the company will continue to trade for the foreseeable future.

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By cparker87
22nd Jul 2015 14:26

Before IHT

The purchase date is before IHT was brought in and Estate Duty existed. I am not 100% sure if that impacts things but it is worth considering; maybe Portia can be coaxed into clarifying as (s)he'll undoubtedly know. =)

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By occca
22nd Jul 2015 14:27

Lots to think about

How is the company going to pay for them?

What about stamp duty, solicitors fees, etc?

Does he currently get rental income from them?  Is it tax efficient for him to get his money another way?

I would get a specialist to deal with this for him

Thanks (1)
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By Imara Group
22nd Jul 2015 14:36

Hello Occa, my view was
-the company could issue shares with a value on the transfer price
-stamp duty and solicitors fee's are negligible considering the values
-no there is no rental income the business uses the premises owned by him for free

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Portia profile image
By Portia Nina Levin
22nd Jul 2015 14:47

Estate Duty

Is not relevant. We are only interested with transfers in the 7 years preceding death or a lifetime chargeable transfer.

SDLT will not be negligible. These will be linked transactions, so the SDLT will be 4% of £750,000 = £30,000.

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By Imara Group
22nd Jul 2015 15:01

Hello Portia Nina Levin,

£30,000 is better than paying £150,000 - £20,000 x 6 x 28% CGT which comes to £218,400.

Would incorporation relief be allowed in the mentioned scenario?

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Portia profile image
By Portia Nina Levin
22nd Jul 2015 15:07

No business is being transferred to the company. Gift relief would be available to the extent that the properties are sold at undervalue, as has been noted.

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By Imara Group
22nd Jul 2015 15:44

Reading this link -

http://www.gabelletax.com/blog/2013/05/24/letting-properties-can-qualify...

Relevant to s.162, the definition of business is very broad. The properties are essentially used to support a trade. The trade being the car business.

Or do you think I am taking an agressive angle?

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Portia profile image
By Portia Nina Levin
22nd Jul 2015 15:57

No
I think you are being dense.

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By Imara Group
22nd Jul 2015 16:06

So polite! It will take you far!

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Replying to braywood:
Red Leader
By Red Leader
22nd Jul 2015 16:10

gift horse

Imara Group wrote:
So polite! It will take you far!

I suggest that you place more value on the quality of the free advice you are getting, and put up with any acerbity.

Thanks (2)
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By cparker87
22nd Jul 2015 17:09

s165(2)(a)(ii)

Am I misunderstanding the meaning of the above clause?

"An asset is within this subection if -

(a) it is, or is an interest in, an asset used for the purposes of a trade profession or vocation carried on by - 

(i) the transferor

(ii) his personal company .... etc"

 

 

Thanks (1)
Portia profile image
By Portia Nina Levin
22nd Jul 2015 17:18

No

The OP is referring to relief under section 162, which will not work, because what is being transferred are assets, and not a business.

I do not think that it has been disputed that relief under section 165 is available.

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By cparker87
22nd Jul 2015 17:45

Thanks

Yes now I re-read the thread I can't see how he's wound up looking at s162 as it isn't mentioned other than in a later of the OP's posts. 

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By Imara Group
23rd Jul 2015 13:43

Thank you all for the above. One final question
-If my client claimed s.165 relief on the mentioned and then after approx. 9 months claimed s.152 relief, by selling the trading business asset and investing into another trading business would there be a significant tax liability?

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Portia profile image
By Portia Nina Levin
23rd Jul 2015 13:50

It depends

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By Imara Group
23rd Jul 2015 13:58

For instance, in 9 months they were to sell the 9 shops which are solely used for the car business, whilst retaining the company which owns the shops. The proceeds were used to purchase a piece of land which the company would also build on, i.e. change trade to a property developer.

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Portia profile image
By Portia Nina Levin
23rd Jul 2015 13:59

No

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By Imara Group
23rd Jul 2015 14:08

No to?
Thanks, Portia
No to?
Thanks, Portia

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Portia profile image
By Portia Nina Levin
23rd Jul 2015 14:32

You cannot claim rollover relief
Into an asset that will be trading stock.

Thanks (1)