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Where Taxpayers and Advisers Meet

Selling to a Ltd Company

Ian McTernan CTA
Posts: 1232
Joined: Wed Aug 06, 2008 3:02 pm
Location: Bedford
Contact:

Selling to a Ltd Company

Postby Ian McTernan CTA » Mon Oct 05, 2015 12:58 pm

Thoughts on this please!

Andy has obtained planning permission on his existing property (PPR) and will build 9 flats (using some of the existing structure plus add ons). Value with planning is 700k. Ignore VAT, future income tax, IHT considerations.

In order to trigger the PPR relief, and to bring future rentals into the company, the property will be sold to a ltd company owned entirely by Andy. We can either sell for 'cash' (ie a director's balance will be created) for 700k or in exchange for (say) 1,000 shares in the company. As connected persons the property will be deemed to be sold by Andy for 700k on his Return whichever method we choose.

Questions are: What is the value for SDLT on the share route? Property will be rented after conversion to non-connected parties so 15% rate not applicable here.

What is the value in the company if we go the share route? Presumably the balance sheet would show the property at market value and there would either be a director's balance (if we 'pay' cash), and if we issue shares then a share premium account?

Obviously we're looking to ensure that we have the maximum cost in the company whilst keeping SDLT down if possible, with 'purchase cost' being 700k for any future disposals.

Many thanks for any replies.
McTernan Associates Ltd
Chartered Tax Advisers
Bedford
Email through link on website:
http://www.imcternan.com

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: Selling to a Ltd Company

Postby section 44 » Tue Oct 06, 2015 10:19 am

What is the value for SDLT on the share route?
The company will incur SDLT based on the greater of the market value of the property and the chargeable consideration given.
What is the value in the company if we go the share route? Presumably the balance sheet would show the property at market value and there would either be a director's balance (if we 'pay' cash), and if we issue shares then a share premium account?
Yes.

Ian McTernan CTA
Posts: 1232
Joined: Wed Aug 06, 2008 3:02 pm
Location: Bedford
Contact:

Re: Selling to a Ltd Company

Postby Ian McTernan CTA » Tue Oct 06, 2015 10:24 am

Thanks section, beginning to think I'm going mad, or just overthinking things!
McTernan Associates Ltd
Chartered Tax Advisers
Bedford
Email through link on website:
http://www.imcternan.com


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