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I own a commercial building in a bad state of repair that I

Customer Question

I own a commercial building in a bad state of repair that I wish to sell to my ltd company and cover the costs of making it into an office for my company. What are the personal and company tax implications of this?


 


The building cost me 20k and the repairs are going to cost me 11k.

Submitted: 1 year ago.
Category: UK Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I'm Keith and happy to help you with your question.

Selling the building to the company, presumably at the current market price, could make you liable to Capital Gains Tax (CGT) on the difference between the price you paid for it and the price at which you sold. If by some off chance the building was also your sole or main domestic residence, albeit unlikely, it might escape CGT completely! There is an allowance of GBP 10,600 or 10,900 depending on the year of sale which can offset CGT. Any sum over this amount would attract a CGT assessment.

The cost of the building to the company is the purchase of a fixed asset and attracts only a capital allowance at a very low rate. The conversion and refurbishment could attract Business Premises Renovation Capital Allowances of 100%, effectively reducing the company's liability to Corporation Tax (CT).

However HMRC advise that:

Renovating business premises

Capital expenditure on the renovation of business premises in certain ‘disadvantaged areas' may qualify for the Business Premises Renovation Allowance (BPRA). The BPRA scheme took effect from 11 April 2007. The scheme was originally due to end on 10 April 2012 but has been extended to 31 March/ 5 April 2017 It covers expenditure on the conversion or renovation of unused business premises that brings them back into business use.

Should BPRA not be available then the refurbishment costs could be charged against the profit and loss account, again reducing liability to CT.
Customer: replied 1 year ago.

So....if I sell the unit to the business at the same price as I paid for it and refurbish it to make it a useful office unit I could reduce my personal tax and company profit for the year? Is it worth doing? It is the only premises I own at the moment, I have sold my house. My business can afford to buy the unit outright. Can you give me very basic figures? Building sale price 20k, refurbishment 11k. What are the basic implications on my personal tax from ltd company? I am hitting 40% tax hard (37k bill this year)

Expert:  bigduckontax replied 1 year ago.
It wouldn't affect your personal tax at all! You could make a capital gain of the 10600/10900 without CGT liability. The only way your company impinges on your personal tax is when it pays dividends (taxed at 10%) which push you into higher tax brackets in which you already are. In this case the dividends are grossed up to your highest rates, hence don't distribute until your income falls. To reduce your personal income tax liability dump moneys in a pension fund.
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 988
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other UK Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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