Company was a successful business but director effectively retired 3 years ago with a rental property on balance sheet. Can he take this out in chunks over say 4 years as divided in specie keeping him in the basic rate band and no stamp duty
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Why not?
EDIT: For the avoidance of doubt, I don't see any reason why this can't be done. It needs legal input though, so that you can structure ownership first of one-quarter of the property, then one-half, then three-quarters, and then all of it.
Otherwise the plan seems to me to work.
For SDLT purposes, these are linked transactions, but if the property is unencumbered there's no consideration.
A revaluation reserve is not distributable. Given the scenario painted in the OP, the directors will need to consider the value distributed versus what is distributable. At the least, this puts pressure on your last point, because they'll need to be careful not to turn that value, so considered, into consideration.
Not total - though wrong in context, I concede.
I accordingly withdraw line one of my comment; I stand by the rest.
I didn't understand the rest.
Assuming that the dividend in specie is possible under company law, and assuming the property is unencumbered, HMRC accept that there's no consideration on a dividend in specie.
Perhaps you have the benefit of having seen the company's balance sheet?
All I really meant was that I thought you were too categoric. Some dividends in specie are treated as for consideration (even ignoring anti-avoidance).
Speaking of which, don't we have the final outcome that one person has disposed of a chargeable interest and another person has acquired that interest via a number of transactions (I'll call them "the scheme transactions")? Also, if you are right, the SDLT payable in respect of the scheme transactions is less than the amount that would have been payable on a notional land transaction effecting the acquisition of the chargeable interest.
In English?
I've said that they are linked transactions (so s 75A isn't in then point). If all are done as dividends in specie, and there is no assumption or repayment of debt (something I said I'd assumed), then there's no consideration for the composite transaction.
Are you saying that 4/4ths x £0 x tax rates > 1/4th x £0 x tax rates x 4? If so, I don't agree.
And? By the time you get to transaction 4. you'll have taxed all 4 transactions as a single transaction.
Give me a section number. As far as I was aware (which, to be fair, was only as far as it is from here to just over there… this is SDLT we are talking about, after all!), s55 might give the same tax outcome as if linked transactions were taxed as one, but it doesn't actually treat them as if they were/deem them to be one. In so not doing, it doesn't disapply s75A. So… what does?
They seem to concern the amount of tax chargeable and how to report it.
They don't seem to deem multiple transactions to be one.
In so not doing, they don't (IMHO) disapply s75A.
If you work s 55(1C) through mathematically, by transaction 4 you end up where you would end up if you applied s 75A. Having already arrived in that place, there's simply no need to move.
Obviously, for it to make any difference, somewhere along the line there needs to be some consideration.
I admit it was an assumption (SDLT is not my bag… in fact, I doubt I will ever say anything sufficiently knowledgeable about SDLT to be deserving of Justin's scorn), but I'd assumed MV would apply in taxing the notional transaction in s75A. Does the reference to Sch 4 para 5 support my guesswork?
1) What reference to Sch 4, para 5? Why would the exchange provisions apply?
2) The amount of the consideration is given by s 75A(4). It ain't market value.
Yes. https://businessdatabase.indicator-flm.co.uk/business_advice_directory/a...
A dividend in specie is prima facie exempt from SDLT because no chargeable consideration is given for the dividend. Declaring an interim dividend to distribute the property* is usually preferable as there are issues with the declaration of final dividends and whether this constitutes a debt to the shareholders. If the transfer of the property is in satisfaction of the debt (e.g. if the shareholder(s) take over a mortgage) then it can form part of the consideration on which SDLT may be payable (see para 8 Sch 4 FA 2003). An interim dividend, on the other hand, does not create a debt as it can be rescinded by the directors at any time until payment**. The resolution could simply be provide for an interim dividend of the property at market value, to be effected by a land transfer (the distribution of the property should be recorded for accounts, and income tax purposes at its market value). You should also check the company's articles to ensure that an in specie dividend is permitted.
The transferee will not have to pay SDLT nor file a return and the land transfer can be sent direct to the Land Registry with a covering letter stating that there is no consideration.
* If the property has been revalued in the company’s accounts, a surplus on revaluation is treated as a realised profit and included in distributable reserves (CA 2006, s 846)
** See para 75 here: http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j11429/TC0...