Creating a group of companies to reduce Stamp Duty

[pcotton]

Hi there,

looked through the threads on Stamp duty. I don't think this one's been asked before, but, will this work?

Option 1
• I transfer the property into a newly formed company, 'Propco'.
• A purchaser comes on the scene after 2 years, and I sell them the shares in that company.

Option 2
• A purchaser comes along within two years of initial transfer to 'propco', property is transferred again to new company 'propco2', a subsidiary of 'propco'. Again the shares are sold.

Could Stamp duty be reduced using this method?.

Thanks,

PC

[Ian McTernan CTA]

Transferring the property in to the limited company will crystallise any CG on the property and hence it will probably not be worthwhile to do this.

I have written a book on using limited companies- see the taxationweb home page and you should see it under the property tax calculator.

Using companies can save on stamp duty but can also create it's own problems.

Ian McTernan CTA
McTernan Associates Ltd
Chartered Tax Advisers
ian@imcternan.com

[paulc]

Neither of these work. I assume in each case that the original owner is a company and that Propco is a wholly owned subsidiary. (If the original owner is an individual, there would obviously be stamp duty on that transfer)

The transfer to Propco would qualify for intra-group relief so no stamp duty would be payable at that point. However, specific anti-avoidance legislation provides that in a situation like this, when Propco leaves the group within three years of the transfer of the property to it, the stamp duty you originally saved by way of intra-group relief becomes payable.

So situation one might work for stamp duty purposes if you wait for more than three years, but as Ian points out, there are other tax consequences to be taken into account.