Situation - client owns a piece of land. On the land - hislimited company (property management had built a house).
I have discussed with the client the need to address that the land is in his own name.
The house has been unable to sell and the client has now advised he has sold his own house and will move into the property until his company builds the next one on the neighbouring piece of land and then he will sell the two of them.
So what would be the easiest way to deal with this given the land is in his personal name and the building in the company name?
Would the client simply pay the company rent and then when the house is sold it is recognised as a sale or would it be more advisable for the individual who owns the land to buy the building from the company (thus recognising the sale) then when he subsequently disposes of it after the next one is constructed it would qualify for ppr given the conditions are met?
This particular client doesn't consult prior to doing things and has complicated this vastly in my opinion and hasn't sought secondary information such as land transfers etc as I have previously advised.
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The renting idea has vat considerations, the company has built the house and presumably claimed back vat on costs, if it now decides to rent the house that will surely be an exempt supply and the spectre of the capital goods scheme may loom large over the process.
i suggest the foundation holes of the second property are dug a little deeper than normal to get rid of the problem!!!!!!!!
Despite the fact that the company built the house - meaning, presumably, that the company contracted for it and paid for it - it is likely that the operation of Land Law means that the individual automatically owns the house because he owns the land on which it is built.
He obviously cannot pay rent for the house or buy it from the company because he already owns it but it looks like either he owes the company for the cost building the house on his land or there has been a distribution by the company to him equal to that cost.
No you don't
I own the house but the land is leasehold
The house belongs to the freeholder because it is on his/hers/its land.
Capital Gains?
Has you client considered the gain arising from the sale of the land to the company?
Silly question, but is
Silly question but is there a reason why client particularly wishes to move into this house- is he angling for PPR relief? Somewhat sceptical?
I know nothing about English land law so comment with reservation.
I certainly think in Scotland he would, as an individual, "own" the house and would now be due to pay his company for the works albeit at what price? Presuming a new build building project the bulk of the company's invoice to him appears to be a zero rated supply ,which is not that bad ,but if he were to sell the two houses (ignoring the living in madness) these would likely be zero rated supplies- is he as an individual vat registered?
But there are issues:
I think the intent at outset to build two houses probably places him firmly into the intent to trade category (not certain-don't have all the detail) so any profit he makes possibly subject to income tax/class IV, not sure of course when he bought land/why but some thought needed re his status here.
I think both him and the company look firmly within the scope of CIS registration, having said that no idea of extent of payments from him to company (maybe none) and company to subcontracors, but may be issue with late registrations/non submitted returns.
This is one of these sorts of cases where letting the client set the pace re information/sorting title etc is a mistake, you really need to put down, in black and white, an analysis of what he is trying to achieve ( where the profit to end up-individual/company etc) where he is in that process, what he needs to do to get to that outcome and in what order and who is responsible for what-if you knowing what is going on but let it all drift then if things go pear shape later re tax (and it is one I would not bet against) you look to me firmly in the firing line for the "but my accountant did not tell me what to do" complaint or worse.
Sort targeted outcome then draw a map to it and stop him doing anything until this is resolved would be my very strong advice.
Ooops, we have seen a few of these in recent years
If the land was his, then the cost of the house built was a taxable benefit unless of course it was made good. There is case law on this and difficult to argue otherwise. I would be rather wary of backdating any transaction and one in land has to be in writing in any case. He could sell the land in consideration of an interest in the property - a long lease perhaps Be careful of s224 TCGA although as someone has said s756 ITA 2007 will probably bite. I bet he has some VAT horrors too.