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Where Taxpayers and Advisers Meet

Tax when extracting property asset from SPV

MrsP.020
Posts:1
Joined:Fri Mar 04, 2022 5:48 pm
Tax when extracting property asset from SPV

Postby MrsP.020 » Fri Mar 04, 2022 6:06 pm

<t>Hello<br/>
My siblings and I have inherited a property which has been held in an SPV since the early 1970s (strictly speaking we inherited the shares in the SPV). We need to sell the property and distribute the proceeds of sale and would welcome advice on any ways to mitigate the double tax charge (corporation tax then capital gains). Because the property has been been held in the company for so long, when sold there will be a very significant gain on the initial 1970 acquisition cost and therefore a very significant corporation tax liability (even after applying indexation relief). In order to extract and distribute the proceeds of sale, we would then need to liquidate the company and distribute the remaining cash to the shareholders, who would also then be liable for CGT (some at the higher rate). Trying to sell the shares in the SPV (instead of selling the property out of the company) is proving difficult because of the latent corporation tax within the company. Is there anything we could do to improve our tax position? Many thanks?</t>

iwmtaxadvisor
Posts:45
Joined:Wed Sep 09, 2020 5:12 pm
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Re: Tax when extracting property asset from SPV

Postby iwmtaxadvisor » Sat Mar 05, 2022 6:23 pm

I think the company should hire a CTA (tax planner) and let him or her loose finding the best solution with all the detail.

I do wonder if the actual tax to pay is as awful as you might have thought, though. The company pays corporation tax on the gains, yes, but there is indexation relief as you know (grab that before the Chancellor removes it). The shareholders then pay gains tax on the shares, yes, but on the value at inheritance. Some of them can perhaps gift their shares to a spouse to whittle away at the liability. Some of them may not be UK resident. Maybe what you end up with is less than a 20% tax rate - which you might live with.

If you answer that the tax is still too high then at least you have a company structure and you can think about reshaping things to qualify for roll over relief. Just possibly you can find a way to absorb the company into a holding company that is trading. Perhaps there is a family member who can buy everyone out and then set about transforming the tax structure at his or her leisure, for the benefit of eventual reduced taxation.

Since you are siblings rather than lineal descendants you might consider banding together to create a (private) SEIS out of the net proceeds, rolling over 50% of the gains into those shares. One wonders if the siblings all need the money now or could wait three years.

Many ideas, all highly dependent as to their workability on the actual facts. But there are ways. Find the right tax planner.
Robert Warren
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