Stamp Duty - Transfer into EIS

by **PhilBous** on Tue May 31, 2011 3:14 pm

I am leading a village buyout of the local pub and have a question regarding Stamp Duty.

We wish to set up an EIS company to run the pub.

The pub is trading and the owner wants to complete before we will have time to collect all of the money.

I can fund the purchase of the pub. We can then set up a new Pubco with investors' money. The Pubco will then buy the pub from me and I will invest in the Pubco with cash, so I will qualify under the EIS rules.

My question is, will 2 Stamp Duty events happen - 1 when I buy the pub and the second when the Pubco buys the pub from me?

Thanks for any assistance anyone can give,

Philip

by **section 44** on Tue May 31, 2011 3:21 pm

Yes, unless you can sub-sell the property to Pubco.

by **PhilBous** on Tue May 31, 2011 3:38 pm

Thanks Mr 44.

By sub-sell, do you mean pass it straight through to the pubco without it becoming my property?

If so, that is our problem as the pubco won't have the cash to buy at that time and the pub must be transferred at full value and the shares in an EIS must be fully paid up.

by **collich** on Tue May 31, 2011 5:24 pm

I haven't fully thought this through but:

Why don't you set up the company in your own name as 100% shareholder. Invest the money into the company in return for issued shares - EIS relief needs to be double-checked on this aspect.

The company buys the pub and then the company in due course issues shares to potential investors. Therefore there is only one purchase of the pub.

The issue is that there is a period of time between your investment and the company carrying the trade. This may be a problem for EIS.

Sorry if you've thought of that and dismissed it.

by **section 44** on Wed Jun 01, 2011 10:18 am

With regards to a sub-sale, would the vendor not accept you exchanging contracts (perhaps with a deposit paid) for the acquisition of the pub with completion delayed (perhaps with a long stop date) pending you establishing Pubco? Provided that the benefit of the contract is assignable, or the vendor agrees to novate (better in terms of VAT) the contract, Pubco could then complete the acquisition with SDLT only payable on that acquisition.

Clearly if the contract had a long stop date for completion then you would be exposed in the event that, for whatever reason, you are unable to establish and finance Pubco. Alternatively you could make the contract conditional - although that wouldn't give the vendor the same level of certainty.

by **PhilBous** on Wed Jun 08, 2011 5:45 pm

Thanks for your replies and sorry I didn't acknowledge them earlier. I appreciate your thoughts.

collich - your idea falls down because no shareholder in an EIS can control more than 30% of the asset (including loans for this purpose).

Mr 44 - thanks. I'll see whether you idea can be made to work.