Anonymous
Share this content
0
507

Tax implication on transfering land to a ltd co.

Hi, my client wants to transfer land to the company. Will there be any cap gains and Stamp duty

Hi,

One of my clients owns a limited company which is into renting business. He now wants to transfer his property (land) to the company in exchange for shares. Will this transfer attract stamp duty and capital gains tax?

Is it better to execute a gift deed infavour of the company? Or 

Is it better not to transfer the land to the company? Or 

Is it better to lend the property as a director's loan and sublet it further from the limited company?

Thanks,

David

 

Replies

Please login or register to join the discussion.

By DJKL
13th Jun 2018 20:03

Starting question, in individual's hands what is it used for, has it been used in a business as an asset subject to CGT (e.g. a farm) has it been held as stock in a business that develops land, is it part of his garden, if effect why does he hold the land?

Thanks (0)
avatar
to DJKL
13th Jun 2018 20:19

Thank you DJKL, The individual has just bought property but he registered it in his personal name instead of the company's. Now he wants to rent out the property using the his limited company as he is on a higher tax bracket. Is it better considering the amount of tax he will have to pay and the stamp duty and cgt if any to transfer the property to the company?

Thanks (0)
By DJKL
to Godwinc46
13th Jun 2018 20:46

Well, if just purchased CGT seems unlikely to be much as value now ought to be pretty close to what he paid.

SDLT appears to be another issue. Presume no borrowing secured on the property?

Appears to be a prime example of talking to one's accountant before acting not after.

Thanks (0)
avatar
to DJKL
13th Jun 2018 20:56

Yes I agree with you prime example of importance of an Accountant's advice he came to us after he has bought the property.
I also thought about lending the land to the company and showing it as Director's loan and the company using it to lend it further like a sublet. Is that a good option?Are there any tax implications for this? or should we consider this the option not to transfer at all?

Thanks (0)
By DJKL
to Godwinc46
13th Jun 2018 21:17

You surely cannot create a loan to the company without transferring the property.

If you lease from individual to company you are into market value considerations which , unless company is adding value, probably gets you nowhere.

I suppose , subject to market value issues, company could charge individual for management, however you are not going to get much more than 15% of rents (Is it residential, cannot remember if you said?) so really not that helpful.

I presume you have considered that the company owning the property will possibly not be a trading company for say ER purposes/ BPR purposes if it owns the property, however given what it already does is let properties (presume its own not other people's) it possibly already fails the tests.

I suspect incorporation relief under s162 is also not an option (Ex Ramsay), but CGT does not appear to be the issue anyway, the issue appears to be more SDLT (Or LBTT up here)

Afraid when it comes to SDLT you need someone who knows their way around the rules, afraid that is not me, the only tax I know less about is NI.

Edit- now see it is land, how is it to be leased, is there a building intent here or just leasing bare land? Cannot imagine much in the way of rents from bare land leasing (We got a nominal £1,000 for a 9 month grazing let of 30 acres)

Thanks (0)
By DJKL
13th Jun 2018 21:20
Thanks (1)
avatar
to DJKL
13th Jun 2018 21:30

Thank you very much DJKL. That was really helpful.

Thanks (0)
avatar
to DJKL
13th Jun 2018 21:46

Hi DJKL, Just wanted to ask you one more thing. Is executing a gift deed in favor of company a good option? are there any tax implications on this?

Thanks (0)
avatar
18th Jun 2018 09:55

You have not indicated the value of the land or whether there is a mortgage on it.

If there is a mortgage SDLT will apply if the mortgage is big enough on transfer to the company. If in joint names you have more to consider.

SDLT is a newish tax and you would be better taking advice on whatever yu suggest to your client as getting it wrong couldbe costly.

Thanks (0)
Share this content