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
Replies (3)
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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.
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.
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