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What are the tax implications of a small company transferring

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land, at an undervalue, to...
What are the tax implications of a small company transferring land, at an undervalue, to a director who owns all the shares please?
Submitted: 4 years ago.Category: UK Tax
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Answered in 24 minutes by:
4/8/2013
UK Tax Professional: TaxVince, Accountant replied 4 years ago
TaxVince
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 965
Experience: Chartered Accountant >20 years + Qualified IFA
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MamaTax :

Hi Its MamaTax Here!

MamaTax :

Thanks for the question.

MamaTax :



If your company sells the property to an individual at below market value, quite apart from it being a breach of the Companies Act, would result in an instant profit in the company as Tax office considers the market value as the deemed selling price. There are many ways the tax office checks the valuation to see if its reasonableness, and these include at registration of the property for stamp duty, on disclosure of the accounts in the accounts, and all tax returns etc …all these could result in the transaction being referred by the inspector to the District Valuer to check.

MamaTax :

In addition there is stamp duty when the director buys the property.

MamaTax :

Let me know if this answers all your questions.






If you are now sorted please could you rate the question before you go.







Thanks



JACUSTOMER-uwbyexbn- :

The idea was to value it at £150,000.

JACUSTOMER-uwbyexbn- :

Also I should tell you that the property is a large piece of land with a small part occupied by a run down dwelling. Another option might be to sell part of the land to the director now, and the balance later, or sell the balance to an arms length purchaser, together with the part now being transferred to the director. The end result would be that the director would receive a substantiual part of the profit, rather than it remaining in the company.

MamaTax :

Thanks for the reply. In any case you still need to sell the property at arm's length. Would you be kind enough to tell me why you would want more profit in the director's account instead of the company. As you may know , companies tax is at 20%, capital gains in an individual capacity is taxed at 18% or 28%. If the gain is large its likely to be taxed at 28%. Ofcourse this is subject to any reliefs.

MamaTax :

If the intention is to reduce tax in company& also avoid SDLT, then one option would be to set up a holding company or another subsidiary both under the control from the holding company- ie set a group of companies and apply for group relief which means transfers between companies are not taxed and you can use whatever price is relevent to transfer the asset from Company A to Company B.

Are you still there? If you are offline, could you please post your reply and i will look at it later.

MamaTax :

Let me know if you have any further comments.






If not could you please rate the question before you go.







I will wait for another 5 minutes to see if you have any concerns. Thanks once again.



JACUSTOMER-uwbyexbn- :

Thank you for your reply.

JACUSTOMER-uwbyexbn- :

The aim is to avoid having to pay 2 lots of tax in getting the proceeds of sale of this land into my personal name. As things stand, i believe that the company would pay tax on the sale, and then I would have to pay tax again on any monies paid to me by the company, such as by way of dividend.

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UK Tax Professional: Lindie-mod,
 replied 4 years ago
Lindie-mod
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Hi, I’m a moderator for this topic and I wonder whether you’re still waiting for an answer. If you are, please let me know and I will do my best to find another professional to assist you right away. I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you. Thank you!

Lindie
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UK Tax Professional: TaxVince, Accountant replied 4 years ago
Im afraid there are not many options as the company is a separate legal entity to you as an individual.
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UK Tax Professional: TaxVince, Accountant replied 4 years ago

Hi. Are you still online?

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UK Tax Professional: TaxVince, Accountant replied 4 years ago

Let me know if you have any further comments. IF you are satisfied could you please rate the question so that i can be paid for the time spent. IF you dont rate, i dont get paid. Thanks,,

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