Selling to a Ltd Company

[Ian McTernan CTA]

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.

[section 44]

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]

Thanks section, beginning to think I'm going mad, or just overthinking things!