CGT & Property

[BMCC]

My family owns an industrial property, it used to be part of a business till my father retired 15 years ago. It has been rented since then, half is vacant at present and the other half is rented to a sole trader. 4 family members own the property equally. If we sell, we will get indexation and taper relief, but will still incur a large capital gains liability. Apart from rollover into VCT's, is there any other way we could reduce the gain and tax liability. We will each be able to use our annual exemption.

[tax accountant]

Hello Brenda,

There are a variety of options that are available to potentially shelter /reduce the capital gain. If you would like to contact me at the e-mail address listed below I will give you a call and run through the options. Further information will be required to determine the most beneficial route however some of the favourites include: use of EIS shares to hold over the gain, crystalising capital losses and restructuring pre disposal to maximise taper relief.
There are of course a variety of other options, however it would be useful to discover more information before providing specific advice.
If you would like to discuss this please e-mail me with your contact details and I would be pleased to provide initial advice.
Best regards,

M Tomlinson
Tax consultant

mal-tomlinson@lineone.net

[steve@nunn-hayward.c]

Hi Brenda,
Before I start looking at Tax mitigation I would like to suggest that the following may also prove worthy of further investigation.

1) What are the Capital gains tax (CGT) base costs of the property owners? When your father retired, did he transfer it at that stage to the 4 family members or was it alredy held by them. If "gifted" were CGT gift elections made to hold-over any CGT arising? Depending on the answers the base costs could be related back to March 1982(and Indexation).
2) From a property Law point of view 4 people owning a property together is very complex and unusual. It is farmore common for the property to be held in a "trust" for thier benefit. A number of issues and planning opportunities turn on this question.
3) The position of the 4 family members (or the trust) in terms of Accrued capital losses, assets that may be sold to realise losses to "frank" the potential gain etc need fully setting out. The point being that some of the planning may not be beneficial for all !

This having been said the alternatives to VCT's are likely to be determined by the reqirements of the family members to be blunt about it "get their hands on the funds".

Planning is however likely to center around either creating a "Business Asset" to gain the 75% "Business Asset Taper Relief", use of other entities such as a Limited company/Trust to reduce the tax rate, or even perhaps becoming "non- resident" and thus exempt from UK CGT?

As you can see however there is a lot to consider.

I would be pleased to chat these issues through with you to assess your requirements and the best way to proceed. Please call me if you wish to take these matters further.

Regards

Steve Cook , ATII
Tax Partner
Nunn Hayward, Chartered Accountants
01753 888211