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Where Taxpayers and Advisers Meet

Mutual club and corporation/capital gains tax

Oldgrumpy
Posts: 2
Joined: Tue Jun 05, 2018 4:57 pm

Mutual club and corporation/capital gains tax

Postby Oldgrumpy » Tue Jun 12, 2018 5:26 pm

Ours is a club that is treated by HRMC as a members club which generates a surplus not a profit and thus pays no tax on income.

We have fallen on hard times, large debts, club buildings becoming unsafe due to lack of repairs & money.

We have sold part of the club, I.E. the stewards quarters, cellars and store room to developers and also had to demolish approx 1/4 of the club plus toilets to allow developers to build on the land.

Money received approx 600k. Paying of our debts, rebuilding the toilets and cellars ect and repairs to building approx 500k.

We believed that corporation/capital gains tax will be due on the surplus, I.E. 100k, but tax man wants it on the 600k (less taxable allowances)

Who is right? Is there a way to reduce tax bill? as if we don't they Club will most probably fail.


Thanks.

OG

bd6759
Posts: 2792
Joined: Sat Feb 01, 2014 3:26 pm

Re: Mutual club and corporation/capital gains tax

Postby bd6759 » Tue Jun 12, 2018 7:04 pm

The proceeds are £600,000. You need to determine the allowable costs to set against the proceeds. These are set out in s38 TCGA 1992 as

a) the costs of acquiring the land
b) the costs of enhancing the land
c) the incidental costs of disposing of the land

Surely the trustees took advice before selling the land.

pawncob
Posts: 4064
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Mutual club and corporation/capital gains tax

Postby pawncob » Wed Jun 13, 2018 11:45 am

I agree with bd6759.
But clutching at straws, consider:
https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm15540
https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm40975

and ESCC15 (which may provide an exemption)

Also consider stepping outside the mutual is a company idea and treat each member as being in receipt of a share of the proceeds, thereby gaining personal annual allowances.
With a pinch of salt take what I say, but don't exceed your RDA


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