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Transfer of Property

Transfer of Property

I am a little worried about what the answer to this may be, but here goes.

Client company has investment property in its books.  Property was previously held as stock, however  later retained for rental return and appropriated from stock to Investment Property.

Director wanted fresh funds into the company and decided to buy the property from the company. 

The figures are as follows:

  • Open market value, realistically c£90k.
  • Valuation obtained from "friendly" valuer £100k.
  • Client agrees to buy for £100k, legal contract concluded on that basis.
  • Client obtains personal mortgage funds for £80k (80%) and deposits this and £20k cash to the company to complete the purchase.
  • Company repays £20k to director as "cashback incentive" for property purchase.

I understand that house builders are giving cashback awards, but the fact that this is to director is worrying and I am trying to make best of the situation.


Sale proceeds within the company accounts, I think this should be £80k (because company has given the £20k back).  This is actually quite a commercial situation.

This then raises the BIK question for director who received asset at undervalue, but is the undervalue just £10k (100-90)?


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By blok
28th Jul 2010 14:20


Hi George,

It may sound dodgy but cashback deals will be happening with a lot of housebuilders at this time. 

Not mortgage fraud, no way.  The lender has lent £80k on a house valued at £100k.  The £90k valuation (by the director) and the £100k valuation by the profesisonal is just a difference in valuations, nothing more.

The actual question is in respect of the consequences of the director receiving effectively the cashback.

In one mind I think that this must have tax consequences, however, on the other, if the company has to gift £20k back to the purchaser to make the sale happen, then this is a commercial arrangement and is common.

The property was appropriated at MV as you say (fyi £85k at that time)  Dr Investment Property, Cr Sales.  This was done last year.


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