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Am i missing something here?

Am i missing something here?

Didn't find your answer?

Recently i have had a couple of situations where potential clients have come in with land holding substantial development potential wanting planning advice.

The advice they have been given is to put the land into a company then sell the land for development.

I cant see any sense in this advice because it just seems to be tax liability after tax liability and a loss of a probable Rollover and/or entrepreneur relief claim.

What am i missing? 

Replies (5)

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24th Apr 2015 14:29

The thinking may be ...

... to sell the land to the company when it may have a relatively low value and then shelter subsequent profits at lower CT rates when land sold on with development value. There is the issue still of extracting funds at some point in the future and, as it's Friday, I can't be bothered to consider whether there might be anti-avoidance.

Not sure in what circumstances you think rollover/ER may be available - guess it depends on what the land has been used for.

Thanks (1)
By The Minion
24th Apr 2015 15:10

i did think that

but the land is already being used for farming purposes so would qualify for ER/RR and the development permission is imminent so not low value any more the hope value has already kicked in.

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Replying to Matrix:
By stepurhan
24th Apr 2015 15:14

What they're missing

The Minion wrote:
the development permission is imminent so not low value any more the hope value has already kicked in.
My guess is that they are thinking the land is still low value at present because the development permission has not yet been granted. As you say, if the permission is so imminent and certain that land values will already largely reflect it, this is not correct.
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24th Apr 2015 15:21

"Used for farming purposes"

How would ER be available (assuming that the farming business is to continue)?

Other than that, I would agree that transfer to a company, to be sold on at the same value, would achieve nothing - other than a double charge to SDLT.

I'm puzzled, though - your concern is that ER and/or RR would be lost.  Why? The sale to the company would, based on the facts presented, generate a chargeable gain to which either or both of those reliefs could, in theory, be applied.

There are other potential issues to consider, which I'm sure you've already thought about. Appropriation of fixed assets? Transactions in land?

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By The Minion
24th Apr 2015 15:27

the farming business would not be continuing

in either of the cases that i have seen.

The value being proposed (by the other advisers, who may be pub occupiers...) is the agricultural land value going into the company, ignoring hope value etc etc

I tried explaining transactions in land etc, SDLT etc but the other advisers advice was more appealing, so i have given them my card for if it all goes wrong, as if...

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