LTD Capital Gains

[ltd101]

Morning, simple tax question that I have heard conflicting advice on & would really appreciate any help.

Person A buys a 100k property in 2000 inside an LTD
Person B buys a 100k property in 2000 in their own name

If both properties are now worth 150k and Person A & B remortgage to suck out equity is it true that the Person A / company has to pay capital gains to reflect the revaluation on the company books immediately whereas Person B delays paying Capital gains until the property is actually disposed of / property sold.

[AvocadoK]

No, there is no capital gain in either scenario. A gain arises when the property is disposed of; remortgaging does not trigger a gain.

But how is Person A going to get the cash out of the Ltd company?

1. Dividend is not possible, because it has not got any distributable reserves
2. Bonus - possibly, but NIC and PAYE will make it unattractive.
3. Loan - but company has to pay 25% tax on a loan to shareholder, plus there is a benefit in kind on the shareholder.

Person B will have none of these issues. Person B's chickens will come home to roost when he finally sells the property, if he keeps remortgaging and spending the money, as he could find that the equity in the property is not be enough to pay the tax.

AK