Distribution/Dividend of capital asset

[georgina_85]

I work for a Limited Company in property investment.

We are looking into potentially transferring a property to our main shareholder (parent company) in a tax efficient manner. Is it possible to make a distribution of this capital asset in the form of a dividend? If so, will this be taxed only at the recipient as income? or will we still be subject to capital gains tax?

[section 44]

From a tax perspective there is no reason why an asset cannot be distributed as a dividend in specie. The recipient of the distribution would not be liable to CGT on it. The distribution would likely be exempt from corporation tax.

Is the property-owning company legally able to make such a distribution (e.g. does it need to have, and does it have, sufficient distributable reserves?).

[georgina_85]

Thank you for your quick reply! It's been confusing me all day!

The company will have the distributable reserves (the parent company shall inject a substantial amount of finance prior to the distribution).

Could you please explain how it is done and why it is not caught by corporation tax?

The distribution to the shareholder will be to our parent company - will their receiving this asset via dividend cause them any corporation tax issues?

[Incredulum]

Is this your German parent company again?

[Incredulum]

Tell us a bit more.

Why do you want to do this?

When was the property acquired?

What is the capital allowances position of the property?

[maths]

Beware of possible SDLT issues.