Share this content

Associated Disposal - Business Asset relief

Disposal of hotel

Didn't find your answer?

 

I have a client who is in the below situation:

Husband and wife personally own a hotel, out of which they run the business through a ltd company.

Someone has approached them and offered to rent the hotel for approx 100k a year with the view in 3 years of buying the building.

The client will not be involved at all they will just collect the rent - the perspective tenant has also said he would like to renovate the hotel in the first year and will spend approx 300k.

I need to brush up on the rules but im wondering if my client accepts and sells in three years if he will still get business asset relief on the sale of the hotel. 

very grateful for any replies/input

 

 

 

 

 

 

 

 

Replies (7)

Please login or register to join the discussion.

avatar
By David Ex
24th Jun 2021 10:24

Am I right that “with the view” means there is no commitment, on day 1, to purchase at the end of the 3 years?

Seems odd that someone would spend £300,000 on a property they are renting for 3 years.

As the clients personally own the property, presumably the company’s trade ceases at the start of the 3 years.

Thanks (1)
Replying to David Ex:
avatar
By jonibarnes
24th Jun 2021 13:04

its very early days yet but my understanding is that no commitment has been made to purchase on day 1 at the end of the three years.

I also think the whole thing looks a bit odd, the rent figure that is being talked about also seems very high.

Thanks (0)
avatar
By Hugo Fair
24th Jun 2021 14:14

No assertions being made here ... but sounds very like a money-laundering process that I've encountered previously (albeit only in Mediterranean countries):
* Purchaser uses 'dirty' money to buy/refurbish properties;
* Ends up with a business generating 'clean' money on an ongoing basis.
Doesn't mind paying over the odds (so long as it remains cheaper than 'commission' charged by overt launderers), but usually expects final purchase price to 'recognise' a portion of expenditure-to-date.

And, even if the deal is entirely clean it's hard to forecast tax implications for the current owners with this little detail ... but BADR is unlikely to be the only area of concern.

Thanks (2)
Replying to Hugo Fair:
avatar
By jonibarnes
24th Jun 2021 14:45

My feeling is that the deal is to good to be true, the hotel currently has a turnover of 200k and 100k a year has been suggested for rent. Seems bonkers

Thanks (0)
Replying to jonibarnes:
avatar
By David Ex
24th Jun 2021 15:49

jonibarnes wrote:

My feeling is that the deal is to good to be true, the hotel currently has a turnover of 200k and 100k a year has been suggested for rent. Seems bonkers

With that new information I’d certainly question the proposals.

Maybe Hugo is right or maybe the hotel will be turned into a cannabis farm. Stranger things have happened.

I think we can rule out any chance of a sale completing three years hence.

EDIT: Who introduced the clients to the potential buyer? Was the hotel for sale?

Thanks (0)
Replying to David Ex:
avatar
By jonibarnes
24th Jun 2021 18:23

The buyer is new to the area - my client heard that he was looking for investments/businesses as described and approached him.

Thanks (0)
Replying to jonibarnes:
avatar
By Leywood
24th Jun 2021 18:34

You know that saying 'it sounds too good to be true'? It just sounds more fishy than a fish pond full of dead fish by the minute. I will hazard a guess that your clients now have their blinkers down and are having a giddy sniff of the champers, instead of doing some basic DD.

I dont envy your position but hope you can get them to see the light!

Thanks (1)
Share this content