Transfer of office owned personally to company which i control

[simpsonite]

Hi all,

My client owns office premises personally which are used entirely for trading purposes by company which she controls.
she has owned the office many years so satisfies the 2 year ownership rule and will enjoy 50% BPR on this asset.

However, we are considering gifting the office to her company.
My client shares would then increase in value based on the valuation of the asset transferred.
The key question therefore is would the ownership requirements having already been met at point of transfer safeguard the 100% BPR in the uplift value of the shares?
Or would my client need to survive a further 2 years from date of transfer of the office to her company?

My client is currently in poor health so i need to be certain on this in the event she were to die within the next two years.

Any input much appreciated.

Thanks,
simpsonite

[AGoodman]

I'm not aware of any reason the shares should not continue to qualify for BPR.

Presumably you want to gift the property in order to avoid the client receiving anything in return (like a debt) that would not qualify for BPR. A few points to consider (if you haven't already!) would be:

- SDLT for deemed market value consideration
- CGT on a disposal (subject to possible holdover)
- IHT on an immediate chargeable transfer to the company if the client is not the 100% owner of the company (so that their estate has not reduced in value)
- corporation tax (I have no idea if the receipt might be deemed a profit).

[simpsonite]

Hi A Goodman,
SDLT & CGT holdover relief have been considered .
Property is valued below IHT nil rate band so although a chargeable transfer there is no immediate IHT due.

We want to gift the property so the building will enjoy 100% BPR effectively in the value of the shares.

Your opinion is that the if the two year ownership requirements are met at the date of transfer of the office block to the company then the shares are automatically covered by BPR up to 100%.
This is how i see the position but solicitor involved is unsure and has cast doubt.

[AGoodman]

My view would be that if the shares meet the conditions for BPR on the death (and it appears they would) then BPR applies.

I can understand the reason for doubt but the onus is usually on the person expressing the doubt to ferret out a justification for it. I can't see one now (but of course don't have the time to review all possible risks).

Failing all else, I might look at the GAAR, but I don't think this is something that would be caught as transferring an office to the business that uses it doesn't sound particularly abusive. It sounds perfectly commercial. The "gift" is a little odd but that is caught by the lifetime transfer rules to the extent the donor's estate is diminished - so the rules are working fine.

As mentioned above, there may be a catch in the corporation tax provisions if it is treated as a profit.