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Why buy land in a company ?

Is buying land in a company more tax efficient than privately?

Didn't find your answer?

I hope I am not missing something obvious or being stupid. Here goes...

I have a client who has purchased land in a company. The company is pretty much dormant until such point that he can sell it to a land developer. 

Now as CGT for the sale of land is either 10%/20% depending on the band, I can't see why he has opted to buy the land through the company (and suffer the administration costs associated with having a company) if he is to be taxed at 19% Corporation Tax. 

It's not as if he is building residential property on it. He is just selling it to the highest bidder when they eventually come along. 

Please help! 

Replies (26)

Comments for this post are now closed.

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By Tax Dragon
26th Jan 2021 05:59

Help with what? This is something you say your client has done. If s/he wanted your input on tax planning, s/he'd've asked.

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Replying to Tax Dragon:
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By Ben2689
26th Jan 2021 11:33

I just wanted help to develop my understanding of why s/he may have done this.

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Replying to Ben2689:
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By Tax Dragon
26th Jan 2021 12:00

I suggest there's a more important lesson: you need a better relationship with your client. First off, they're not using you for advice; second off, you're too scared to ask them who they are using, or, if no-one, why they aren't using you.

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Replying to Tax Dragon:
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By Ben2689
26th Jan 2021 13:13

The client is not seeking advice. This is merely a query for my own development and understanding.

I hope you conduct yourself better when you are speaking to clients. Your social skills are appalling.

Save yourself some time responding to queries if all you are doing is giving people grief. Very sad

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Replying to Ben2689:
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By Wanderer
26th Jan 2021 13:27

Ben Tooke wrote:

The client is not seeking advice. This is merely a query for my own development and understanding.

I hope you conduct yourself better when you are speaking to clients. Your social skills are appalling.

Save yourself some time responding to queries if all you are doing is giving people grief. Very sad

Wow!
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Replying to Ben2689:
Hallerud at Easter
By DJKL
26th Jan 2021 13:27

At least Tax Dragon speaks to his her clients before they do things, his/her point is on the nail, why are you having to play catch up?

Nobody can give advice as to whether or not what your clients has done is a good idea or a bad idea because there are myriad moving parts and plenty of other considerations that may or may not impact their decision making.

As to conducting oneself, a mirror might be useful.

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Replying to DJKL:
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By Ben2689
26th Jan 2021 13:37

I am not speaking with the client about anything. Nor am I playing catch-up. I merely asked a question to the community in order to help my own understanding/check that I wasn't missing anything.

Nice to see that keyboard warriors and online "bullying" are not exclusive to Facebook and Twitter.

Here is an example of the short answer one of you could have given.

"It doesn't look like you're missing much in terms of CGT vs Corporation Tax, but they may have other reasons for buying land in the company such as [insert suggestions]".

Instead, you decide to attack someone for asking a question. Pathetic.

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Replying to Ben2689:
Hallerud at Easter
By DJKL
26th Jan 2021 13:59

You are missing something, a vast amount of information from the client.

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Replying to DJKL:
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By Ben2689
26th Jan 2021 14:55

The question was not specific to the client. The client's situation was used as an example.

For the 5th time, I was merely trying to see if I had missed anything specific to CGT and Corporation Tax.

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Replying to Ben2689:
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By Youareatit
26th Jan 2021 15:26

People like you should keep pushing back like this. The more you do the less folk there will be to respond when you ask your half baked questions. This site has already been decimated by folk exactly like you and is littered with folk no longer interested in helping because of attitude like yours.

Come back when you have half the knowledge that TD has. Come back when you have helped half the folk TD has.

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Replying to Youareatit:
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By Ben2689
26th Jan 2021 15:40

I think you will find that the community has a reputation for being unkind to people asking questions.

If I had half of his knowledge I would be a expert and my questions wouldn't be "half-baked". Guess what, i'm not. Hence i asked a question.

I would be open to suggestions such as "it's really difficult to answer without more information". But no, I'm met with disgust and sheer arrogance.

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By Wanderer
26th Jan 2021 07:15

Why not ask the client and/or whoever advised them at the time?

There can be a number of reasons, and tax may not be one of them.

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By frankfx
26th Jan 2021 10:44

A few piecemeal hit or miss answers here may not serve you well

Ask client for his reasoning.

He may say he read two books on the subject.

Have you?

Check out Jim Slater, the Zulu Principle.

Or attended a course.

Or sought advice from others.

All before parting with the cash and ongoing costs.

Let us know what he says.

Then we can chew over pros and cons.

Or marvel at the thoughtfulness applied before he made his decision.

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Hallerud at Easter
By DJKL
26th Jan 2021 11:06

Have you considered that CGT may or may not have been on point and Income Tax may or may not have been a pertinent factor impacting his decision making?

Edit- is he himself seeking planning, if site capable of getting planning why is he reducing likely selling price by not obtaining it himself, or is he taking the subject to planning sale route with all its travails?

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Replying to DJKL:
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By Ben2689
26th Jan 2021 11:36

You're right. I have assumed that it is all to do with tax planning but it might not be.

As you may have guessed, i am no tax expert. I just wanted to make sure i was not missing something obvious.

Before speaking to the client about, i did not want to be red-faced if he hit me with some clever tax planning that i was not aware of.

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Replying to Ben2689:
Hallerud at Easter
By DJKL
26th Jan 2021 11:38

It may be re tax, you seem to be blindly assuming CGT as the relevant tax, it may be it is but that is certainly not a given.

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Replying to DJKL:
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By Ben2689
26th Jan 2021 13:14

Okay - thank you. I will keep this mind.

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By Tax Dragon
26th Jan 2021 14:07

This is way more than you deserve (there's only one person doing any "attacking" in this thread and that's you), but here's one theory (others have already been provided, but absent any info, who knows?!) consistent with the facts supplied:

It doesn't look like you think you're missing much in terms of CGT vs Corporation Tax, but they may have other reasons for buying land in the company such as it's adjacent to their existing factory (that they run in another company that they haven't told you about). At one point, they thought they would need the land to expand, plans have changed, now they have some surplus land in a near-dormant company. A year or two later, they appointed you - apparently your particular skill is dealing with near-dormant-company accounts.

But I'm out - you'll be pleased to hear. I don't like being attacked for giving (you) some (IMHO) pretty sound advice.

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Replying to Tax Dragon:
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By Ben2689
26th Jan 2021 15:07

Is that right?

Tell me, if a student asked you a question, would you start off by saying that they are scared? Or that if they wanted advice, they would ask them?

"apparently your particular skill is dealing with near-dormant-company accounts." - Another snide comment to add to the rolodex of put-downs. A consistent theme throughout your 'advice'.

"It doesn't look like you think you're missing much in terms of CGT vs Corporation Tax, but they may have other reasons for buying land in the company such as it's adjacent to their existing factory (that they run in another company that they haven't told you about). At one point, they thought they would need the land to expand, plans have changed, now they have some surplus land in a near-dormant company". - This is great! Exactly what i'd expect from a professional like yourself that is clearly more clued up than me. That's all i was ever after.

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Replying to Ben2689:
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By Tax Dragon
26th Jan 2021 15:15

Read your question:

"I have a client who has purchased land in a company. The company is pretty much dormant... I can't see why he has opted to buy the land through the company..."

Read the responses you've had (which were tailored to your scenario - the one you described, anyway).

Now come at me again with your points. But have a think first. Ask yourself this: Has this thread gone the way it's gone because of you, or me?

But I really am out.

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Replying to Tax Dragon:
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By Ben2689
26th Jan 2021 15:25

So here is a basic breakdown of what happened for you....

1) Person A asks question to a community

2) Person B says "If s/he wanted your input on tax planning, s/he'd've asked"

So what's your lesson there then? Never ask a question?

But yes okay Duncan Bannatyne, I'm out too.

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Replying to Ben2689:
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By Youareatit
26th Jan 2021 15:31

Learn from your mistakes.

You did not state initially it was for your own development, nor that you only had half a story.

Asking such questions on a forum for professionals during the January tax season just smacks of only thinking of yourself anyway.

Only one word of 'thank you' to DJKL, never mind the rest.

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Replying to Youareatit:
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By Ben2689
26th Jan 2021 15:44

My mistake being that I asked a question...

One that has eventually been answered with some sort of decency and empathy that I may not be a tax expert.

As for the January season comment, they are not compelled to answer my question now. I didn't hold them to ransom .

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Replying to Ben2689:
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By Youareatit
26th Jan 2021 15:53

I have no doubt that next time they wont bother to answer.

Your arrogance knows no bounds.

As has been suggested, look in the mirror.

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Replying to Ben2689:
Hallerud at Easter
By DJKL
26th Jan 2021 16:01

So in summary you wanted people here, with no real context, to list for you the myriad reasons why someone might or might not place potential development land within a company, effectively a how long is a piece of string type question, considering tax, asset security, inheritance issues, control issues, bank requirements, funding, everything; Accounting Web as a totally free tutoring service.

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Tallula Brogan
By Tallula Brogan
26th Jan 2021 16:11

Hi everyone,
After reviewing this thread, the moderating team have decided to limit any further comments. Thank you.

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