Ltd Co inheriting Property

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We have a client who has done a deed of variation in favour of his ltd co for his late Aunts property.

Is this a case of recording the property at nil value in the accounts as you would with a ordinary gift?

If he had wanted to create his Directors Loan account, am I correct in thinking that he should have received the property under the will and then sold it to the company at OMV, declaring any CGT gain or loss on his personal return if that differed from probate value?

TIA

Replies (13)

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By Justin Bryant
28th Sep 2020 10:57

This has been mentioned here before if you do a search re potential SDLT saving and other tax issues etc.

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By Stats696
28th Sep 2020 11:18

I could only see previous threads on gifts to ltd co from the donor, not using DOV

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Replying to Stats696:
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By Justin Bryant
28th Sep 2020 11:41

You are not good at searching. I found this in less than 10 secs: https://www.accountingweb.co.uk/any-answers/deed-of-variation-in-favour-...

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Replying to Justin Bryant:
Psycho
By Wilson Philips
28th Sep 2020 12:41

A very helpful thread, indeed. There was one particularly helpful comment which I must remember for future reference:

it rather suggests that I'm right and you're wrong if insults is all you have to argue with

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By Stats696
28th Sep 2020 12:21

Thanks for that, although that thread seems to be looking at SDLT implications.

In this instance the transaction has already occurred and the property is owned by the company. The client is saying that he thought he would have a DCA equal to probate value, however, I cant see how this could happen as the property was never his.

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By ireallyshouldknowthisbut
28th Sep 2020 16:00

I'm intrigued as to the "why on earth would you do that?" question.

I am struggling to seethe commercial reason for taking on the burden of a ltd co, the poor CGT position and (normally) inferior income tax position for an unencumbered property, other than "I read you should put property in a company" type reasons.

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Replying to ireallyshouldknowthisbut:
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By Stats696
28th Sep 2020 16:02

Because he is a highest rate personal taxpayer, and already has a property rental company.

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Replying to Stats696:
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By The Dullard
28th Sep 2020 16:26

And what moron came up with this cunning plan? In the thread that seems to be all about SDLT it is explained why it doesn't achieve the particular aim of not being taxed on the rental income.

If he had (1) inherited the thing from Aunt Mabel in the first instance, and (2) sold it to the company for market value (=probate value), there wouldn't have been any capital gain, he'd have the DCA he craves, and he wouldn't be the settlor of a trust arrangement that falls foul of the settlements legislation.

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Replying to The Dullard:
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By Tax Dragon
28th Sep 2020 17:24

Reference your last point I think Justin should resurrect his Levy argument. In the old thread, the donor was one of 5 shareholders. If the OP's client is the 100% shareholder (and ideally remains so for a nice long while), the 'no bounty' argument may have legs. (Or even caffeinated wings.)

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Replying to Tax Dragon:
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By The Dullard
28th Sep 2020 17:32

And, if the settlements legislation doesn't apply, there's a backstop in ITA 2007, Pt 13 Ch 5A.

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Replying to The Dullard:
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By Stats696
28th Sep 2020 19:42

I can only conclude some well meaning solicitor

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Replying to Stats696:
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By Paul Crowley
29th Sep 2020 10:16

If only solicitors could find some other professional to discuss their clever ideas with

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Replying to Paul Crowley:
paddle steamer
By DJKL
29th Sep 2020 10:33

They cannot do that, upon becoming a solicitor one apparently becomes all knowing- over the years my most difficult clients were always solicitors and at times trying to suggest that my father listened to my advice was to come into contact with the immovable object.

Now I like solicitors, both my mother and father were solicitors, I was brought up in a home where 50% of my parent's friends were Edinburgh lawyers etc, but boy can they all argue. I blame it on the school qualifications, to get in to study law they need to be in the top sets at school which seems to imbue them with certainties beyond those of us lesser mortals. (somewhat like doctors)

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