is there a way to avoid/minimise CGT or corporation tax?

is there a way to avoid/minimise CGT or...

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Limited company sells freehold property owned by it and which was rented to a third party business to trade from. Capital gain made £600k. The company's business in the last 2 years was renting this freehold (£30k) and a house adjacent to it (£50k). In addition, it was renting taxis to drivers (£30k). Prior to the last 2 years, the freehold sold was used by the director's other company (hiring and repairing taxis) to trade from (rent-free). The disposal proceeds are either going to be used to buy more properties or to be gifted to the family. 
My question is whether there is any way to avoid/minimise corporation tax on the company's gain by the availability of some relief??

Replies (14)

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By chicken farmer
13th Nov 2013 09:34

No

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Man of Kent
By Kent accountant
13th Nov 2013 09:41

Not so hasty

Initial response - look at roll over relief on the sale of the property.

It's always wise speaking after the event but you really should have looked for tax planning advice before selling the property.

Lots of information but much more needed.

I would suggest that you get as much information together as possible and speak to an accountant.

 

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By Ian Bee
13th Nov 2013 11:16

Chargeable gain

I agree with Kent accountant on possibility of rollover relief, but also how has the gain been calculated. Is this the accounts profit or is it the taxable gain? For instance, look at indexation, Mar 82 valuation if relevant, costs disallowed for CT that might be reflected in the state of the asset on sale.

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By Steve Kesby
13th Nov 2013 11:34

Rollover relief...

... isn't available because the asset disposed of needs to have been used only for the purposes of a trade carried on by the person disposing of it. The property appears to have been used for the purposes of renting it to someone else, which isn't a trade.

On the facts provided, I'd agree with with the first poultry response.

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Replying to stepurhan:
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By HeavyMetalMike
13th Nov 2013 12:21

Or he should have groups the repairing of taxi company underneath so lease to a s/s might (??) have qualified for rollover. Surely it would, i'm guessing.

But all too late now I'm afraid.

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Replying to stepurhan:
By shogun
13th Nov 2013 14:14

How about s.152 (7)? doesn't it permit rollover relief of the gain attributable to the fraction of the ownership during which the building was used for the company's trade? If so, a substantial proportion of the gain would be held over.

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By HeavyMetalMike
13th Nov 2013 14:27

The properties are investment properties. The income is letting.

Not a trade.

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Replying to andy.partridge:
By shogun
13th Nov 2013 14:58

isn't income from taxi rentals a trade? 

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Replying to atleastisoundknowledgable...:
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By HeavyMetalMike
13th Nov 2013 15:26

Buy a car, rent to it to a taxi driver. The client is a landlord / investor. Not a taxi driver.

What was the freehold property used for? Storing all the taxi cabs? Did they all come back to base each night?

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Replying to Matrix:
By shogun
13th Nov 2013 17:36

There are contracts with taxi drivers for weekly or monthly rentals of the taxis owned by the company. The taxis do not return to base overnight but stay with the taxi drivers. I don not believe this is not a trade. On a similar note, what about out hire of equipment companies then? 

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By Steve Kesby
13th Nov 2013 14:43

I thought...

... that the property was used for the purposes of a trade carried on by "the director's other company".

If it has been used for the purposes of a trade carried on by a group company, S. 152(7) might apply if reinvestment where made in an asset brought into use for the purposes of a trade carried on by a group company.

By letting it to another company that's simply under the control of the same individual though, means it is just letting and not a trade. It also seems to be proposed to reinvest in other rental properties.

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David Winch
By David Winch
13th Nov 2013 17:47

Can you clarify?

I thought from the original post that the company which owned the property, call it X Ltd, (and sold it and made the capital gain) rented out the property (a) originally to another company, call it Y Ltd, owned by a shareholder in X Ltd and (b) later to another company, call it Z Ltd, unconnected with X Ltd or Y Ltd.

So the question is, "Was this property used by X Ltd for the purposes of a trade which was carried on by X Ltd?" and the answer to that question is, "No, the property was rented out by X Ltd".

That being the case there appears to be no roll over relief available.

Have I misunderstood something?

David

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Replying to andy.partridge:
By shogun
13th Nov 2013 20:26

Hi

Apologies if it was not clear enough. Company X owns the freehold and used it for its own trade of renting taxis to drivers and also taxi repairs. The building was also used by a second company (under common control) rent-free. This activity goes on for many years. It then rents the garage building to a third party for couple of years until it sold it and made the gain. In my opinion the garage building was used for the trade and because no rent was collected from the second company, it qualifies for rolling over the gain (to be apportioned by the number of years of ownership less two). Thank you.

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David Winch
By David Winch
13th Nov 2013 23:34

OK

Your latest reply gives a different impression of the underlying facts.  You are now saying X Ltd DID use the property for its own trade until two years ago.

David

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