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What charges for gifting land to Ltd Company?

What tax considerations are there if a gift of land is made to a Ltd Company to build houses on.

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My Father has a parcel of land which at present is the end of his garden (private and main residence). He has just gained planning on the land for 3 houses. He does not wish to finance the build himself and has therefore offered to gift it to my company to build the houses. He is a minor shareholder (11% of shares) in the company but does not take any dividends.

What are the tax implications here? Is there SDLT to pay on the market value? As I understand it there is not Capital Gains Tax to pay as the land is at present his garden.

I have thought about him giving the value as a 'Director Loan' but this could have implications for Inheritance Tax as the loan would almost certainly not be paid back (as to do so would result in the build becoming not viable economically).

We could of course set up another Ltd company but I am not sure this would make any difference to any potential tax implications?? 

Any and all help/advice would be greatly appretiated.

Many thanks for your time folks.

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22nd Apr 2019 10:59

Given the amounts likely to be involved (and the lack of some details in the question), paid professional advice would seem to be essential here...

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to WhichTyler
22nd Apr 2019 13:09

Thank you for taking the time to reply. That is where we are going next I just thought I would try to pick a few brains first....knowledge is power and all that...on the converse......a little knowledge is dangerous :)

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to Rob Brown
22nd Apr 2019 13:20

A little knowledge is very dangerous in these situations.

So your plan to "pick a few brains first" is flawed on several fronts. There is likely to be relevant information missing, making any answer you get wrong. The "little knowledge" you get here might cause you to argue with your accountant (if you actually have one) and take a less advisable route.

Most importantly, the answers you get here might be wrong. Possibly because they are given by someone without the requisite knowledge. Possibly because they are given by someone that thinks anyone asking such a vital question of a free forum deserves an expensive lesson.

Do you really want to take that chance?

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22nd Apr 2019 11:51

Interestingly, I think I've seen the OP posting on a building trade forum seeing if he can get a builder to build him the 3 houses for free.

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to Accountant A
22nd Apr 2019 13:07

No you haven't. Planning was only granted last week. We have the funds to build it is just about the structure to minimise exposure to tax.

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to Rob Brown
22nd Apr 2019 16:51

I think he was joking; and trying to point out that some people are prepared to ask for valuable professional advice for free, when they wouldn't dream of asking a tradesman to work for nothing...

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to WhichTyler
22nd Apr 2019 17:33

Having been running my own business for over 35 years and making a very successful go of things, when people ask for my advice on areas I know well I always give it, even if to say "this is my take but you need additional targeted advice from..... etc. I do not try to undermine, belittle or make jokes at them as it is not my place to and I do not have to, to try to make myself feel important or more powerful. I only posted to gauge any possible advice which may have been out there in addition to the advice I will be getting from my own (very highly paid accountant and solicitor) who has always in the past provided sound and meaningful advice (granted I have paid for it). If you can not give me any advice than that is absolutely fine and I totally understand you feel your advice is always worth something and you should be remunerated for it. My advice to you in this case is just say nothing at all.

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to Rob Brown
22nd Apr 2019 23:43

Rob Brown wrote:

My advice to you in this case is just say nothing at all.

So you join yesterday looking for free advice and then start telling accountants who are legitimate users of this site how they should use it? Do one!

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to Rob Brown
23rd Apr 2019 08:46

Rob Brown wrote:

Having been running my own business for over 35 years and making a very successful go of things, when people ask for my advice on areas I know well I always give it, even if to say "this is my take but you need additional targeted advice from..... etc. I do not try to undermine, belittle or make jokes at them as it is not my place to and I do not have to, to try to make myself feel important or more powerful. I only posted to gauge any possible advice which may have been out there in addition to the advice I will be getting from my own (very highly paid accountant and solicitor) who has always in the past provided sound and meaningful advice (granted I have paid for it). If you can not give me any advice than that is absolutely fine and I totally understand you feel your advice is always worth something and you should be remunerated for it. My advice to you in this case is just say nothing at all.

Congratulations on reaching the final stage of the freeloader. The claim of having a hugely successful business that gives out free information at the drop of a hat.

Are you able to offer any proof of this claim? For example, a link to a free online forum on which you have done just that.

I find it especially funny that you claim to have your own "very highly paid accountant and solicitor" and yet you aren't simply using them to answer this query. What makes this potentially complex situation worth "picking the brains" of others when you have such stellar advisers available.

My advice to you is that if you don't like how people respond to you on a FREE forum you don't post dumb questions on them. I would also advise you not to make grandiose unsubstantiated claims either. Without proof, it just makes people believe you even less.

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to stepurhan
23rd Apr 2019 11:59

stepurhan wrote:

Congratulations on reaching the final stage of the freeloader.

Think it's actually the penultimate stage. The final stage is deleting his postings and then flouncing off.

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By DJKL
to Accountant A
23rd Apr 2019 12:15

"What charges for gifting land to Ltd Company?
What tax considerations are there if a gift of land is made to a Ltd Company to build houses on.
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My Father has a parcel of land which at present is the end of his garden (private and main residence). He has just gained planning on the land for 3 houses. He does not wish to finance the build himself and has therefore offered to gift it to my company to build the houses. He is a minor shareholder (11% of shares) in the company but does not take any dividends.

What are the tax implications here? Is there SDLT to pay on the market value? As I understand it there is not Capital Gains Tax to pay as the land is at present his garden.

I have thought about him giving the value as a 'Director Loan' but this could have implications for Inheritance Tax as the loan would almost certainly not be paid back (as to do so would result in the build becoming not viable economically).

We could of course set up another Ltd company but I am not sure this would make any difference to any potential tax implications??

Any and all help/advice would be greatly appretiated.

Many thanks for your time folks."

So here it is ,preserved like a dinosaur in rock.

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to Accountant A
23rd Apr 2019 14:07

Accountant A wrote:

stepurhan wrote:

Congratulations on reaching the final stage of the freeloader.

Think it's actually the penultimate stage. The final stage is deleting his postings and then flouncing off.

I stand corrected. You are quite right.
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22nd Apr 2019 16:11

Rob Brown wrote:

I have thought about him giving the value as a 'Director Loan' but this could have implications for Inheritance Tax as the loan would almost certainly not be paid back (as to do so would result in the build becoming not viable economically).


Apart from everything else to consider, doesn't this imply that the the land is being over valued?
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By DJKL
to WhichTyler
22nd Apr 2019 22:57

Implicitly yes as development land valuation tends to be the resultant arising from a desktop valuation starting from the selling price of the completed houses and working backwards by deducting costs and appropriate profits re say the construction activity, professional fees etc. If that results in no value remaining the land is, as a development. worthless.

However usually, unless the issue is say having to keep listed buildings/facades or a lot of off site costs, if the development is still uneconomic then there tends to be an issue with the type/style /chosen materials/construction technique to be employed and a rethink is required- wrong property for the site. (Certainly if other builders in the locale are managing to build profitably there ought to be value in the site)

But it is not impossible to end up with zero, we had a site with mindful to grant for 20 new builds and conversion of two existing buildings into 5 houses, by the time we costed the conversions (listed), the on site roads and the offsite required road improvements re the perceived additional road movements the development would bring ,we could not profitably build- it can happen but I would be surprised with a two/three unit site.

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to DJKL
23rd Apr 2019 08:51

But if there is a zero net gain for the owner (currently Dad), alternative planning suggests itself.

OP, the answer to your question as written can only be that there are tax issues (including but not limited to income tax, corporation tax, capital gains tax, inheritance tax and SDLT) for various parties.

There are also potential non-tax issues, some of which may come to the fore if you have siblings (or there are others that could lose out from your plans for your Dad to gift your company some of his wealth).

Since it is your Dad's property, he's the one that should be taking advice. Any advisor worth his or her salt will want to see your Dad. If you want advice that's worth its salt, you will need to find such an advisor.

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By DJKL
to Tax Dragon
23rd Apr 2019 09:26

I have no doubt it has suggested itself, clients have lots of wonderful ideas, or so they believe.

Step 1 would be looking at comparative outcomes if houses build or if site sold as is, the most dangerous thing I have experienced with families and property development is what I would call Everest moments- things get built because the family already own the land rather than because the decision (compared with alternative projects) is the best one to do next.

Assuming capital rationing doing the project straight in front of your nose is often not the correct decision.

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23rd Apr 2019 09:49

35 years of making a successful business....in that case you really should now better. There is nothing 'common' about 'common sense'...it seems to be an endangered species these days....

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23rd Apr 2019 11:18

I'm more interested in that by paying for the land it would make the build un economic ! .

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to meadowsaw227
23rd Apr 2019 11:44

I refer you to the sub-thread started on 22nd Apr 2019 at 16:11.

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