Considering a strategy for a property development Co.

Considering a strategy for a property...

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I'm looking to see if anyone has some ideas as to whether this will work, has a better idea or can worn of pitfalls.

Currently an industrial site is used for trading but has planning permission to build 10 houses. It belongs to the sole trader who wants to cease trading and take advantage of ER.

Given he can't get any sensible offers on the land he is considering setting up a Limited Company, as himself the only director, to do the development, or at least start it, sell some plots, build houses etc.

Can he lend the Ltd Co the money to buy the land from himself, without actually handling any money?

The upside being the limited company would be able to pay the loan off as the houses sold. The profits of the Ltd Co would be offset by paying well for the land in the first place.

The downside would be the ER tax would be due in a short time.

The sums involved could be £100k for a plot, with the houses selling for £400k each.

Is this the most tax efficient way of using the land? Is there another mechanism to put the asset of the land into the Ltd Co that can be realised later, tax efficiently?

Many thanks

Replies (4)

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By Tosie
26th Apr 2014 11:48

My advice

In view of the amounts involved you need specialist advice as to the set up. It will be a mixture of different vehicles. You also need advice on timing of events.

Such advice will not be cheap but essential.

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By badgered1
28th Apr 2014 13:03

Yes

that route will be necessary. I was hoping to get a bit more of a map before setting off.

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By MBK
28th Apr 2014 13:12

You are definitely on the right track

Transfer to limited company at current value to crystallise ER. Develop within the company. repay the DLA arising from the original sale, then liquidate the company once the development is finished and get the profits out at 10% using ER again.

Standard planning. Not rocket science. Doesn't need real high level specialist input.

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By badgered1
28th Apr 2014 14:02

Ah barking up the right tree

Where would one get a HMRC palatable valuation?

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