I am part of a 20-man syndicate buying our village pub to save it from development. We are setting up a property company and will rent it to a tenant - it will be rent free for the first year, but the tenant will spend £50,000 on repairs after a fire. Is there any way we can defer stamp duty, because we are struggling to find the £10,000 required?
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No (unless the deal is structured in such a way that you don't know how much you're going to pay for the pub).
I'm sure there is. But it will be so cunning that the fees will probably get close to eliminating any SDLT saving
I agree with the posts above. Are you sure you cannot raise the money between the shareholders it is only £500 each.
Something else that worth well need considering. is a £50,000 investment for a year rent free is not a good deal.
for a little extra investment any potential landlord could invest in a pub with a proven turnover of between £400,000 and £5000,000. With a rent of around 50k
Can you get the whole village involved? You may be surprised where money comes from. I was involved in the community acquisition of our village pub so send a PM if you would like to discuss our experience.
I doubt a pub with a £400000-500000 turnover would have to be bought as a community asset as it probably is very profitable and would sell for more than £400000 in the open market
The short answer is yes you can. There is no requirement to pay the SDLT upfront to get the SDLT5 certificate (in order to register the title, but if you have a lender they will insist on that). HMRC will then start chasing you for the SDLT, but there is no late payment penalty; only late payment interest @2.5% and I reckon it would take HMRC about 12 months to start getting heavy re debt collection and you should be able to defer for at least 6 months without too much difficulty if you have no lender.
Thanks, Justin. It never occurred to me that a valid means of deferring tax is not to pay the tax.
On a more realistic note - the OP says that the 20 of them are struggling to find £10k between them to pay the SDLT liability. Yet you seem to assume that they will be able to finance the purchase price without involving a lender??
Given the year 1 rent free if they have a lender either they are all already injecting extra to cover the year one cashflow shortfall or they have somehow managed say an interest only year one facility with it rolling into the debt (I suspect very difficult these days) and repayment of the loan starting subsequently.
Must admit if there is a bank they are either brave or have inserted safeguards; day one they have a fire damaged pub, if tenant does not perform what then, hardly the most marketable asset.
But with my advice HM Government are acting as an almost too good to be true unsecured lender of part of the cost @2.5% for 6-12 months. That's the whole point that you appear to have missed and I would be surprised if there is a mortgagee here due to lack of income etc.
I didn't miss any point. I was assuming that what the OP was after was a legitimate means of postponing payment of the liability without falling foul of HMRC (even if the consequences are only the charging of a small amount of interest). Any fool can tell someone that they can defer payment by deferring payment.
Who knows about the existence of a mortgagee? You may well be right. I'd be equally surprised that they've managed to find unsecured funds for the purchase price yet are struggling to find only a further £10k.
But with my advice HM Government are acting as an almost too good to be true unsecured lender of part of the cost @2.5% for 6-12 months. That's the whole point that you appear to have missed and I would be surprised if there is a mortgagee here due to lack of income etc.
If anyone wonders where things like the limited cost trader scheme and harsh escalating penalties come from, it is because people abuse the system like this. "Who cares if everybody else suffers from the subsequent harsh crack-down as long as we get away with taking the [***] for the time we need to benefit".
I am appalled that any so-called professional would advocate such a course of action.
I largely agree, Stepurhan, but have you never advised a client to delay submission of their CT600 until the filing deadline in order to give the company an unofficial 3 months TTP facility?
What complete nonsense! You clearly know nothing about giving proper tax advice. That aside, interest @2.5% compensates HM Government for their time cost of money and furthermore I prefer that pubs are not developed in the first place.
Thank you for the clarification. It's up to you whether you wish to take Justin's 'advice', and hope that HMRC don't come after you too quickly.
If you're that close, can you not persuade one of the larger investors perhaps to make a shortish term loan to cover the shortfall? Offer interest (obviously, with a rent free period, payment would have to be delayed); be prepared to offer security as well.
Have you thought about brewery finance? This could be a better option. Then instead of leasing out the pub employ bar staff for the day to day running.
They would then need to raise extra funds for the restoration as the prospective tenant was doing works in exchange for the rent free. (Which may have certain tax implications)
The last thing I would ever suggest is trying to run a pub if not experienced.
The problem is i think they are going to have problems getting a tenant on the deal they are offering.
I have made some assumptions that the OP and his investors are looking at charging the tenant £50,000 pa rent after year 1. If not they will have to increase the rent free period.
The reality is if any pubco or brewery thought they could generate a rent of even £30,000 it would of been snapped up.
I agree. I wouldn't be forking out £50,000 myself - especially as I'd be earning nothing whilst the refurb is being done.
But - hey - I'm sure the OP and his fellow investors have thought of that. If they haven't and no tenant is willing to take it on, they'd need to rethink the deal on offer at that point. Finding a tenant is not something we can help with on this site.
"Finding a tenant is not something we can help with on this site."
Speak for yourself, locating tenants is our reason to live.
Catch is pub tenants are thin on the ground, we have one licensed property remaining, we have been seeking a tenant over the last two years, to date only tyre kickers.
Now, if a nice industrial unit, smaller offices, that would be more up our street.
If someone comes to me telling me they want me to act for their pub tenancy, I politely decline and offer the free advice "Don't bother - just get a proper job."
The days of pubs being cash cows are long gone - though the firm I worked for in the 1980s made most of their turnover from the licensed trade.
Times change. Buckie is so cheap at the supermarkets.
I have to disagree my practice is 100% based on pub clients and we have 4 pubs of our own.
Our average pubco clients make £30,000 pa , free of tie tenants £55,000 and freehold business an average of £80,000.
The pub trade is still in a good state but like any other business venture you have to do your research.
sorry chaps but I need to "flag" this as our village is going to be in same boat later this year so thank you for your answers. (fellow professionals, surely I'm allowed to free load this answer).