Having worn that teeshirt 40 years ago no argument from me re newly qualified especially from the big boys who often know how do an audit blindfold but little else. What they fail to mention is why should anyone go to them rather than an ACA/ACCA or whatever (lets not go there). Are they guaranteeing their fees are 50%lower or just hoping that's the inference ? What's their "USP" (ugh) other than slagging people off ? Does the fact that they were presumably rubbish at exams give them a distinct advantage ? What does their client do when they mess up ? Complain to a non existent regulator ? HMRC maybe ?
As this is a one man band company why do it this way ? It would be classified as a trade by HMRC so no CAs and as the sale would have to be at MV you would incur CT on the profit from sale (+ SDLT on uplift). Also CIS implications this way.
Why doesn't he do it as a self build residential conversion , register for VAT and claim it back that way ? Also lower SDLT, no CT on profit from sale and as (presumably again Portia) his PPR any uplift would get PPR relief. If not to be his permanent PPR then perhaps higher CGT on sale so that may be a minor consideration.
I have many clients who have become friends or close acquaintances but no friends who have become clients so agree with your dad. Can lead to problems if things go pear shaped for whatever reason especially when HMRC get involved.
Ah Tom you're a youngster....I was at Keele from 74 to 77 and remember the Service Station fondly.
20 years ago I was doing exactly what I am now doing. Sitting at the same damn desk ploughing through files and chasing the usual suspects for their information to meet deadlines. Albeit with IT advances doing in a day what it would have taken a week. Remember when the IT geeks promised us we would have so much more "quality time". Yeh right !
The reply from DJKL is a noble attempt to shed light on what are complex issues with a large degree of subjectivity. My take is:
1. Has to be at MV due to connected status that would at this stage include considerable hope value (if not full value with PP) given that the context of your question is almost as a fait accompli. By the time you ask these sort of questions its often too late although with CGT at max 20% of little concern. In fact depending on SDLT/other costs you may want to max out (legit of course)the gain going in and let the sisters sort it out if they need to. If transfer at lower value the company pays the excess at not much below 20% + an exit charge on the sisters when wound up.
2. Both would pay at the marginal rate whether 10/20%. Not enough info re sisters trade - highly unlikely ER available but refer comment at 1.
3. Very messy and given above comments not recommended.
My main concern here would not be tax but their experience to do this. The number of people who have come unstuck adopting the "how difficult can property development be" approach is scary. Personally I would get PP and flog the land to the highest bidder !
Reckon we're all a bit sensitive in these PC times. When I started 40 years ago (admittedly in the City) it was more a question of a second or third pint at lunchtime or a sneaky couple before getting the tube home. Good advice here though. Golden rule is for every bottle of wine drink at least the equivalent units in beer to keep hydrated.
Can believe that as Leicester were incredibly 5000-1 before a ball had been kicked ! So guess if Brexit/Trump were 6 -1 off then its likely you'd had netted a cool mil. I'm getting in now on George Clooney in 4 years time at 1,000 -1 and Corbyn as next PM at 50-1. £100 should net me a cool £5m.
After Leicester City and Brexit this was inevitable. Bumped into some Americans in Rome recently and they were all soooo embarrassed to have this clown even standing and even more convinced he'd get stuffed. So much for the American dream. Apparently congress are already debating whether to convert to a monarchy and rename the USA Trumpton. Seriously.
Agree other comments. The company limitation is geared to the £40k pa limit with the previous 3 years unutilised relief. Thus company could in theory pay £170k for the current year assuming no previous contributions.The employee is merely limited on an annual basis to the higher of £3600 and salary.
As a loan think the way to do this would be to treat it as a loan subject to an immediate waiver. Under the debt relationship rules it should as being between related parties be neutral for tax purposes. It certainly is not a capital gain. Best way for future CGT surely though is to issue further shares to her at an appropriate premium as she already owns 100% of the company.That way when sold or wound up she should get tax relief for CGT.
My answers
Having worn that teeshirt 40 years ago no argument from me re newly qualified especially from the big boys who often know how do an audit blindfold but little else. What they fail to mention is why should anyone go to them rather than an ACA/ACCA or whatever (lets not go there). Are they guaranteeing their fees are 50%lower or just hoping that's the inference ? What's their "USP" (ugh) other than slagging people off ? Does the fact that they were presumably rubbish at exams give them a distinct advantage ? What does their client do when they mess up ? Complain to a non existent regulator ? HMRC maybe ?
As this is a one man band company why do it this way ? It would be classified as a trade by HMRC so no CAs and as the sale would have to be at MV you would incur CT on the profit from sale (+ SDLT on uplift). Also CIS implications this way.
Why doesn't he do it as a self build residential conversion , register for VAT and claim it back that way ? Also lower SDLT, no CT on profit from sale and as (presumably again Portia) his PPR any uplift would get PPR relief. If not to be his permanent PPR then perhaps higher CGT on sale so that may be a minor consideration.
I have many clients who have become friends or close acquaintances but no friends who have become clients so agree with your dad. Can lead to problems if things go pear shaped for whatever reason especially when HMRC get involved.
Ah Tom you're a youngster....I was at Keele from 74 to 77 and remember the Service Station fondly.
20 years ago I was doing exactly what I am now doing. Sitting at the same damn desk ploughing through files and chasing the usual suspects for their information to meet deadlines. Albeit with IT advances doing in a day what it would have taken a week. Remember when the IT geeks promised us we would have so much more "quality time". Yeh right !
The reply from DJKL is a noble attempt to shed light on what are complex issues with a large degree of subjectivity. My take is:
1. Has to be at MV due to connected status that would at this stage include considerable hope value (if not full value with PP) given that the context of your question is almost as a fait accompli. By the time you ask these sort of questions its often too late although with CGT at max 20% of little concern. In fact depending on SDLT/other costs you may want to max out (legit of course)the gain going in and let the sisters sort it out if they need to. If transfer at lower value the company pays the excess at not much below 20% + an exit charge on the sisters when wound up.
2. Both would pay at the marginal rate whether 10/20%. Not enough info re sisters trade - highly unlikely ER available but refer comment at 1.
3. Very messy and given above comments not recommended.
My main concern here would not be tax but their experience to do this. The number of people who have come unstuck adopting the "how difficult can property development be" approach is scary. Personally I would get PP and flog the land to the highest bidder !
Reckon we're all a bit sensitive in these PC times. When I started 40 years ago (admittedly in the City) it was more a question of a second or third pint at lunchtime or a sneaky couple before getting the tube home. Good advice here though. Golden rule is for every bottle of wine drink at least the equivalent units in beer to keep hydrated.
Can believe that as Leicester were incredibly 5000-1 before a ball had been kicked ! So guess if Brexit/Trump were 6 -1 off then its likely you'd had netted a cool mil. I'm getting in now on George Clooney in 4 years time at 1,000 -1 and Corbyn as next PM at 50-1. £100 should net me a cool £5m.
After Leicester City and Brexit this was inevitable. Bumped into some Americans in Rome recently and they were all soooo embarrassed to have this clown even standing and even more convinced he'd get stuffed. So much for the American dream. Apparently congress are already debating whether to convert to a monarchy and rename the USA Trumpton. Seriously.
Agree other comments. The company limitation is geared to the £40k pa limit with the previous 3 years unutilised relief. Thus company could in theory pay £170k for the current year assuming no previous contributions.The employee is merely limited on an annual basis to the higher of £3600 and salary.
As a loan think the way to do this would be to treat it as a loan subject to an immediate waiver. Under the debt relationship rules it should as being between related parties be neutral for tax purposes. It certainly is not a capital gain. Best way for future CGT surely though is to issue further shares to her at an appropriate premium as she already owns 100% of the company.That way when sold or wound up she should get tax relief for CGT.