Sale of property , to director

[ainaedil]

My company bought three properties for 150,000 funded by director's loan.

The properties were in bad condition, so required renovations.

Now company has no money to finance this renovation(Neither director).

Properties value has increased £175,000.

I have transfered the properties( registered with Land registry as well) to My( directors) name because I wanted loan from bank for renovation , They were not giving loan to company.

Is there any tax due because of £25,000 increase and transfer/sale( no monies transfered )

If yes can i avoid it , say by having contract that company is still ultimate benefiary( because later on I will transfered the properties to company again).

Thank you.

[pawncob]

You've transferred £175,000 of company assets into your own name.
Let's assume that there is no attempt to defraud the company.
The whole of this amount is taxable on you personally, so you must attempt to mitigate that liability.

Can you provide evidence that you're acting as a bare trustee? Can you show a legal agreement that the property has been transferred back to you in repayment of the loan? If so then you've only taken £25,000 from the company.

The company will pay CT on the gain of £25k and you'll have to repay the £25k to the company.

[Incredulum]

I think you should go to a solicitor.

I'm not sure that you will manage the beneficial/legal split. It would be the ideal situation - and because it's your own company it's not difficult for you to agree with the company that that is what happened and that is what had always been the intention. But, I'm not sure the bank will lend you money on a property that is not beneficially yours; I think you may have to declare this point to your bank, and I think that the moment you declare it thus it is difficult to argue the other way for the purpose of tax.

Are you sure about the 175 valuation? Might it not be that high?

And I'm afraid you should probably have paid SDLT at 1% on the value of the property.


On the other hand, you obviously weren't out to defraud your own company. It appears that perhaps you are, currently, only a nominee for the company, not the beneficial owner. And you can wind up the company, distributing the asset to yourself - thus avoiding SDLT.

Assuming the company has not previously acquired net negative reserves the £25k profit should (significantly) be distributable to you as shareholder.