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ER not available if rent is paid.

Can I check my understanding on ER and Rent

Didn't find your answer?

The scenario is:

Limited company operating vatable business.

Building is purchased with mortgage via either a Top Co or director. This building is the one currently rented by the company. Keen to ensure purchase is a TOGC to avoid a not inconsiderable amount of VAT on the purchase.

Thus, building cannot be within operating company - as there would be no landlord /tenant and hence no TOGC.

If the landlord is Top Co, then could the director claim ER on everything upon disposal?

If the landlord is the director personally (with the mortgage), and receives rent, then presumably ER would be restricted?

Thanks

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By tonycourt
27th Nov 2019 16:17

Tom, I must say your post would be easier to follow had you left out the irrelevances. Sorry for the whinge but there it is. Anyhow.....

I assume you're asking if a director who personally owns a property which he lets to his company as premises for its trade makes a gain in connection with a disposal of his shares in the company which qualifies for ER, will the relief be restricted if he has charged the company rent ? The answer is yes.

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By Trethi Teg
27th Nov 2019 16:22

I am trying to understand your question but the way it has been written (knocked out with little thought to clarity) and the lack of detail, particularly relating to the disposal, means that is impossible.

I suggest that if you want a sensible answer you spend more than a minute and a half setting out the position far more clearly.

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By The Dullard
27th Nov 2019 16:39

Unless the question has been edited, it seems perfectly clear to me.

A trading company is currently renting a property (which the current landlord has opted) from a third party, and now has the opportunity to purchase it. If TradeCo purchases it, there will be VAT (and extra SDLT), as there will not be a TOGC. The apparent irrelevances.

Options are for another group member company to purchase it and rent it to TradeCo or for the owner/manager to purchase it and rent it to TradeCo.

Option 2 isn't ideal because on a later disposal there would be a (possibly 100%) restriction on ER for the property (due to renting) and the property will also only qualify for 50% BPR in the event of the individual's death.

Option 2 means that there will be full ER on TopCo's shares and they will qualify for 100% BPR.

It seems to me to be a perfectly understandable scenario.

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Replying to The Dullard:
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By tonycourt
27th Nov 2019 16:58

Oh well done you!

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Replying to The Dullard:
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By tom123
28th Nov 2019 08:01

Many thanks, (I have presumed you mean option 1 in your first 'answer')

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Replying to tom123:
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By The Dullard
28th Nov 2019 10:23

Option 1 is for group company to purchase and is the preferred option (my penultimate paragraph). Option 2 is the owner purchasing and is the non-ideal option (my pre-penultimate paragraph).

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