A tax lawyer with more than 15 years of tax experience, having worked for City law firms and a Big Four accountancy practice.
Intra-group transfer doesn't extinguish the gain
This shouldn't really be a problem, either from your client's point of view or for HMRC either.
When setting up a new group, the transfer from A to B preserves the gain inherent in the property. B inherits A's base cost (adjusted for indexation), together with any other allowable costs.
1. No tax to be paid on the A-B transfer; but
2. The gain is triggered either when B sells the property, or if B leaves the group within 6 years.
The anti-avoidance rule you were looking for is contained in 2 - i.e. it is written into the rules on intra-group transactions.
If you don't mind a little self promotion:
have examples with numbers. I hope this helps.
CGT and value shifting on share dilution
This is always an issue where the majority shareholder who controls the company causes the company to issue shares to other people. Although there is no actual disposal, value is said to pass from his shares to the others.
E.g. in this case, we have a 100% shareholder to begin with, but then his interest goes down to 25%. Under the value shifting rules, there is a CGT charge, but only to the extent that the others have underpaid for the shares. It may well be in this case that the numbers aren't great enough for there to be a problem - as Simon points out, gains are likely to be under the annual exempt amount. But you don't want to get into a value-shifting situation, as it involves having to obtain a valuation.
Simon's suggestion is a very neat way round this.
You can read more about value shifting here.
Big Four have always been interested in SMEs and start-ups
When I was at a Big Four, they had a unit for the SME market. I was even told that they had special fee arrangements for start-ups/small businesses. We were even told that a certain girl band had been clients - and then they made it big time, but still benefitted from the lower rates!
Won't say who the girl band was. You'll have to guess...
Not if its an individual person transferring the shares
The stamp duty reliefs are usually for corporate/corporate transactions. It would work if buyer and seller were in the same corporate group.
There are ways of paying less duty - for example you can structure the sale price as non-monetary consideration. But I can't think what this could be in this case. Monetary consideration includes paying cash, issuing shares, assumption of debts.
Write from the heart
That's what it boils down to.
When I write, I ask myself - how would I explain this to someone in front of me? Just as if I'm talking to them?
The following is an extract from one of the articles from my own site, which explains my own approach:
"The articles you see are the type of articles that I myself would like to read if I were learning the subject for the first time. As CS Lewis said: “People won’t write the books I want, so I have to do it for myself”.
It also helps if you read a lot. This gives you the vocabulary you need. You have a much wider range of words to choose from, making it easier to craft sentences and paragraphs together.
I'm assuming you own the farm and the assets personally, and not through a company.
Selling the barn at the same time as closing the business
If I sell the unconverted barn with planning permission I think I should be able to claim entrepreneurs allowance as I would also close the farming business at the same time as the sale.
By "close the farming business" if you've closed the business by stopping trading then ER for the barn can be claimed, but only if:
1. The barn is still in use at the time the business ceased; and
2. You sell the barn after you close the business, not at the same time. And you have three years to do it.
If you find a willing buyer for the farm, then no, you won't be able to claim unless you sell the barn to the same buyer. If the business is still live and kicking, the assets can only qualify for ER if the whole or an identifiable part of the business is sold.
But my doubts arise from this: Is the barn still in business use, now that you've obtained planning permission? Doubtful.
Converting the barn and selling it later
If I convert the barn, live in it myself for a few years whilst carrying on the farming business, but then sell the converted barn at the same time closing the farming business, can I claim entrepreneurs allowance on the capital gain from the barn even though I have spent money renovating/converting to residential ?
No. Whether you sell the farm or cease trading. The problem here is that the barn is no longer in business use at the time the farm is sold, or at the time you cease trading.
Why do you want to incorporate? Why use up your CGT allowance?
Perhaps your client should be asking himself these questions.
Why incorporate - apart from the tax, as well. Would it be simpler to operate as a company? Would there be more paperwork involved (e.g. sending various yearly returns to Companies House).
As taxguru points out, the company can't claim relief for the goodwill anymore.
You can still incorporate a business and claim CGT relief by being issued with shares. The CGT just gets rolled over into the shares and the tax charge only gets triggered when the shares are sold. No need to use your CGT allowance unnecessarily - but how much CGT would be at stake anyway? What would the value of "one year's worth" of goodwill be?
Not really....unless the client is also a company
The companies aren't in the same corporate group. Although the client happens to be the connecting factor, this doesn't make them a group.
One company needs to have equity in the other - (at least 75%) - not possible if a human holds all the share capital in both.
If the client were a company, then yes this would work.
You may find this article helpful
Liquidation not a disposal per se
I seem to remember that the mere fact that the company has gone into liquidation isn't a disposal for CGT purposes - even though the parent no longer has beneficial interest in the shares. Liquidation doesn't cause automatic degrouping charges either - subject to various subtle points. There is a good explanation in Bramwell if you have access.
It's what happens afterwards that is taxable or not. E.g. subject to SSE (if applicable) the proceeds of liquidation are treated as a capital distribution. But am happy to be corrected on this.