OWNERSHIP OF PROPERTY

OWNERSHIP OF PROPERTY

Didn't find your answer?

A new client company runs a livery yard - land and buildings acquired from a third party some years ago before our appointment - financed by loans raised for the purpose.

The assets and loans were accounted for in the company's accounts, but it has come to light that all actually in the director's personal name - I think only due to bank preference rather than deliberate planning.

On the basis of "substance over form" - is it realistic to continue with this treatment with an appropriate disclosure note?

Or best to "strip everything out"?

Replies (3)

Please login or register to join the discussion.

By johngroganjga
10th Mar 2016 14:01

Before you ask the client whether he is holding the property on trust for the company I would work out the answer to his inevitable first question - what difference does it make?

Presumably the first difference would be that if you strip everything out there will be a debit to the client's loan account equal to the equity in the property.

Thanks (0)
avatar
By JDBENJAMIN
10th Mar 2016 16:51

If the property and loans are in the director's name.....

....my view would be that the accounts have been fundamentally wrong ever since! Either the company owns the assets or it doesn't. I can see no substance-over-form argument here.

Thanks (1)
Replying to DJKL:
By johngroganjga
10th Mar 2016 17:04

Trust

JDBENJAMIN wrote:

....my view would be that the accounts have been fundamentally wrong ever since! Either the company owns the assets or it doesn't. I can see no substance-over-form argument here.

Unless the director holds the property on trust for the company.

Less clear with the loans I agree.

I agree that substance over form doesn't come into it. But I do not agree that the analysis stops with whose name is on the deeds. It's beneficial interest that counts.

Thanks (0)