My client company has a commercial property that is currently been rented out, it has a small mortgage on it. He would like to set up a subsidiary, 75% owned by his company, 25% owned by another investor, pay off the mortgage and transfer the property to this subsidiary. The investor would put in some funds to help develop the property. The idea would be to knock down and develop the property into residential housing and then sell the houses.
Are there any HMRC clearances or other tax implications my client should be aware of when transferring the property?
Replies (7)
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I assume it goes across at cost for corporation tax purposes.
I'd be interested to know whether that assumption is correct. Do you mind posting back when you have confirmed the position?
Google "tax on transfer of assets to subsidiary" or such like. There's loads online about capital gains groups.
Don't forget SDLT.
Although one company is disposing (selling?) a capital asset[*] and one acquiring (buying?) stock. That's not your bog standard situation, so I would say use Google with caution (and Aweb with care).
[*] assumption alert.
Any shares being issued to holdco in exchange for the property and for the other investor injecting cash into sub?