Help Please! on how to structure a property transaction

[charlottestax]

The Land Registry has processed an Assent for an inherited property and it is in the new name of an individual.
An SPV owned by the individual seems sensible to carry out a property development into multiple apartments.
A Will can be changed to allow a different beneficiary, but can this method be used to transfer the property to an SPV and thus avoid paying SDLT at the outset, which would otherwise be at the higher rate?
The SPV would need to hold the property as an asset at the proper value in order to reduce corporation tax accordingly when the development is sold.
The SPV might have another shareholder being an incorporated development partner, does that make sense as a structure?

Thank you

[bd6759]

The SDLT positionn should be Ok as long as DOV made within 2 years of death.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00560

Not sure why you think the company will acquire it a MV. Stock is valued at cost. Put another way, if you DR stock. what would your CR be?

[charlottestax]

The SDLT positionn should be Ok as long as DOV made within 2 years of death.

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm00560

Not sure why you think the company will acquire it a MV. Stock is valued at cost. Put another way, if you DR stock. what would your CR be?

Thank you for the tax manual refrence which I quote below.

"A transaction following a person’s death that varies a disposition (whether effected by will, under the law relating to intestacy, or otherwise) of property of which the deceased was competent to dispose, is exempt from charge if the following conditions are met

-the transaction is carried out within the period of two years after a person’s death
-no consideration in money or money’s worth other than the making of a variation of another such disposition is given for it
This exemption applies whether or not the administration of the estate is complete or the property has been distributed in accordance with the original dispositions."

Your question is the nub of the problem.
Is there a way to not pay the SDLT and still have the property value reflected inside the company so it is a base cost for gains and hence corporation tax?

If the property is retained by the individual, I understand for CGT purposes the base cost is Probate Value.
Is the Probate Value allowed as a deduction on sale when there is a Company beneficiary?

[charlottestax]

Not sure why you think the company will acquire it a MV. Stock is valued at cost. Put another way, if you DR stock. what would your CR be?

Thank you.

To clarify, I did not mean the company will acquire it at MV. Its books and accounts would show it as nil I was thinking. Perhaps it could be revalued and a reserve created if necessary.

Irrespective of revaluation or not, for tax purposes, I was hoping the property would be taken in to the computation at MV, since I understand that is what happens for individuals for CGT calculations after receipt and sale of an inherited property.

I'd appreciate further comment.

[charlottestax]

To clarify by "Tax Purposes" above, I mean "for Corporation Tax Computation Purposes"

[bd6759]

Tax follows the accounting treatment unless there is a specific provision.

Stock is valued at the lower of cost or net realisable value. It is never revalued upwards.

This is not an individual and CGT is not applicable.

[charlottestax]

Tax follows the accounting treatment unless there is a specific provision.

Stock is valued at the lower of cost or net realisable value. It is never revalued upwards.

This is not an individual and CGT is not applicable.

Thank you, so if the property is stock received at nil cost but held at net realisable value it would generate an immediate profit from the sound of it.

If held at Cost

CT Act 2010 refers to Taxation of Chargeable Gains Act 1992 Section 8 from which 8 (3) is as follows:-

(3) Except as otherwise provided by this Act or any other provision of the Corporation Tax Acts, the total amount of the chargeable gains to be included in respect of chargeable gains in a company’s total profits for any accounting period shall for purposes of corporation tax be computed in accordance with the principles applying for capital gains tax, all questions—

(a)as to the amounts which are or are not to be taken into account as chargeable gains or as allowable losses, or in computing gains or losses, or charged to tax as a person’s gain; or
(b)as to the time when any such amount is to be treated as accruing, being determined in accordance with the provisions relating to capital gains tax as if accounting periods were years of assessment.

being determined in accordance with the provisions relating to capital gains tax as if accounting periods were years of assessment.

Which seems to be saying that the CGT Acts are used for CT chargeable gains purposes. Am I reaching too far to think there is possibility there that as inherited property has a base cost for an individual for CGT, then so would a corporate inherited property have that same base cost??

[sandy2000]

A Will can be changed to allow a different beneficiary, but can this method be used to transfer the property to an SPV and thus avoid paying SDLT at the outset, which would otherwise be at the higher rate?

Though SDLT is saved ... Will the IHT liability not arrise or increase by such a transfer to an SPV (compared to when the property is left to children and spouse)?

[charlottestax]

A Will can be changed to allow a different beneficiary, but can this method be used to transfer the property to an SPV and thus avoid paying SDLT at the outset, which would otherwise be at the higher rate?

Though SDLT is saved ... Will the IHT liability not arrise or increase by such a transfer to an SPV (compared to when the property is left to children and spouse)?

Good Question. In this case the Gross Estate is below the IHT threshold as a 2nd nil rate band is available from a deceased spouse. So there would be no extra IHT to pay if an SPV were to inherit.

But in general, yes IHT does need to be considered where the inheritor is the spouse or child of the deceased.

[bd6759]

Stock: You are ignoring the fact that stock is valued at the lower of cost or NRV. Its not pick and choose.

CGT? Totally irrelevant. This is a trading activity. The company will be liable to corporation tax on the profits of the trade. That is why the property is stock.