A director has previously (2001) provided his company with a loan of £125k , some years ago, to assist in purchasing a commercial office. Over the period the loan has increased to £180k re other needs or funds.
This has not been repaid nor has any interest been levied/paid. The business let the property to various tenants since. It opted for VAT on the building, and charged VAT on rents.
The business is now winding down, rental has stopped and it is intended to sell the building and repay the directors loan. There will be some increase in value of the building over the period (Market value is around £200-£240k) but the accrued CGT allowances are likely to offset any capital gain on this for the business if sold. Questions are:
What is the most tax efficient way to do this?
From what I read the business may have to charge VAT on the sale. If so may restrict the marketability and realisable price of a sale, unless buyers can reclaim VAT.
One idea suggested is for the building asset to be sold/transferred to the director in lieu of the loan amount. But if viable would this not involve VAT on the sale/transfer and render it unattractive as he cannot reclaim VAT personally?
other info: director /shareholder is over 55;other shareholder and director is spouse.
may alternatively be some potential to sell business and building as a going concern (possible tax advantages ) but smaller market.
Any other ideas/ suggestions welcome.
Replies (6)
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If VAT is going to be an issue three options:
Sell the shares
Sell the business
Wait a year or so.
I would go back to the adviser who structured the business and revisit the advice you received since I presume exit strategy was discussed.
Ian, it looks from companies house like 'a director' might be you? Given the figures don't you think a bit of paid for advice might be a good idea?
Your reference to “accrued CGT allowances” in relation to a company suggests that you misunderstand how the capital gains of companies are taxed. Firstly they are subject to corporation tax, not CGT. Secondly, whereas they benefit from indexation allowance up to 31 December 2017, there are no other “allowances” as such.
I wouldn't mind betting that the reference to CGT was because the OP started by reading this thread https://www.accountingweb.co.uk/any-answers/transfer-of-fixed-assets-to-..., which mentions CGT. (There's a bit of a clue in that the OP asked his question on that thread before starting his own.)
I agree with you though. Misunderstanding has arisen (notwithstanding Steve Kesby's excellent analyses and explanations on the old thread).
It beggars (my) belief that people try to do things like this by the use of search engines and chat forums and without talking to experts in the field. I would never try to build my own house. No matter how good my sonic screwdriver and internet searching abilities, it would take me forever and probably fall down before I finished. I'd get someone who knew what they were doing to do it - or at least get their help. I know it would cost me less in the long run.