Non resident company capital gains on shares sold

Is there double tax on sale of a 'UK property' Non resident company?

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A Non-resident company “A” holds 100% shares in two companies non-resident companies “B” and “C” each with UK commercial property.

Company B

  • Bought a property in April 2020  for £1m
  • Market value of property in Sept 2021 for £1.5m
  • Company B sells the property in October for £1.7m

Company A sells 100% Company B shares for £1.5m in Sept 2021. Gain of £0.5m (assuming initial equity of £1m).

I understand Company A has to file a capital gains return regarding the £0.5m gain. Will Company B will pay corporation tax on the gain of £0.OK7m (1.7m – 1.0m)  or the gain of £0.2m (1.7m – 1.5m)?

Can Company A use capital losses on its property in Company C to net off the gain from sale of shares in Company B?

thanks

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By Justin Bryant
11th Oct 2021 14:47

I think A can offset its b/f capital losses (but not any inherent, crystallized loss of course re the property in C). At least that's the case for non-UK resident humans. See:

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg21500

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15800

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg73920

Company B will indeed pay CT on its £700k gain (so there will be an element of double tax overall).

Quite a good investment incidentally.

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Replying to Justin Bryant:
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By Jupiter Accountants
11th Oct 2021 19:13

i dont see why someone would buy a non-resident company with UK property as they will pay corporation tax on the gain inherited in the property. Re the above example Company B will pay tax on £0.7m gain yet the property only gained £0.2m from the date of its purchase.

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Replying to Jupiter Accountants:
Psycho
By Wilson Philips
11th Oct 2021 20:05

That would be the case whether the company is UK resident or not, and simply illustrates the potential double tax charge arising when property is held in a company. The ‘solution’ is to discount the purchase price to reflect the latent tax charge. Were I the purchaser in the OP’s question I would not have paid £1.5m for B

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