7 year rule

by **bil8999** on Wed Aug 10, 2011 8:40 pm

Hi to all

Can we gift property into a ltd company to avoid tax assuming we live another 7 years?
thanks in advance.

by **AvocadoK** on Thu Aug 11, 2011 7:57 am

Hi
Who will be the shareholders of the limited company? If it is you, then you will not have made an effective gift for inheritance tax purposes (because your assets have not gone down, they have just changed in composition). Worse still, you could have a capital gains tax bill on the transfer of property, plus stamp duty land tax. It's a complicated area, full of traps.
Regards
AK

by **Generix** on Thu Aug 11, 2011 10:20 am

AvocadoK wrote:Hi
Who will be the shareholders of the limited company? If it is you, then you will not have made an effective gift for inheritance tax purposes (because your assets have not gone down, they have just changed in composition). Worse still, you could have a capital gains tax bill on the transfer of property, plus stamp duty land tax. It's a complicated area, full of traps.
Regards
AK

Hi Avo - would this still be the case if they were a .g. 50% shareholder? (My thinking is that they would have effectively reduced their assets by 50%)?

(Just curious)

by **PKIB** on Thu Aug 11, 2011 12:45 pm

Agree with what incredulum has written but for a transfer to be a PET does it not have to be a gift to an individual (or certain trusts)?

by **Generix** on Thu Aug 11, 2011 3:43 pm

PKIB wrote:Agree with what incredulum has written but for a transfer to be a PET does it not have to be a gift to an individual (or certain trusts)?

huh? was his post deleted or did u mean Avo?

by **PKIB** on Thu Aug 11, 2011 7:30 pm

You are quite right - I meant AvocadoK. Sorry for the confusion

by **maths** on Thu Aug 11, 2011 8:16 pm

The transfer of a beneficial interest in property (ie a gift) from an individual to a company is not a PET but a CLT for IHT purposes.

As avocadoK states if the transferor owns 100% of the company then there is no transfer of value for IHT (ie neither a PET or CLT) and thus no IHT consequences.

If the transferor owns 50% of the company then the CLT equates to 50% of the value transferred (as per Generix).

What are you trying to achieve?

by **bil8999** on Fri Aug 12, 2011 5:48 am

Hi Maths
What we would like to achieve by geting the properties 25 in total into the ltd company is to gift them over and make daughter and son in law directors, we can then build the business up say for the the next 5 years, then retire gifting our shares over to them.
Is this possible?

by **Peter D** on Fri Aug 12, 2011 3:49 pm

If you gift the properties to the company it will be deemed as disposals at open market value and you will be liable to CGT on the total gain. Regards Peter