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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Its a property issue. property was owned partly by

Customer Question

its a property issue.
property was owned partly by my dads company and it closed in 2008
company owned 40% and me and my brothers owned 60%
company closed without sorting out property
now we need to sort out property so when we transfer the 40% to ourselves we have to pay capital gains tax
is this correct.
or as there is no company now its been 7 years we dont pay tax
Submitted: 2 years ago.
Category: UK Tax
Customer: replied 2 years ago.
surely now the company is closed we don't owe anything. the company had my brother as director too.
I would think they cannot chase us for this as its past the time limit like 7 years
If I transfer the 40% to us then what will happen, will we get a tax bill?
or if we keep quiet and just transfer it to us then how will they know.
Expert:  Tony Tax replied 2 years ago.
Can you tell me what the nature of the business was and whether the property was used in that business please. Do the title deeds still show the company's name as a part owner of the property?
Customer: replied 2 years ago.
It was a computer business and it was not used as the trading address as he had an office for this. It was bought by my dad on advice of accountant to avoid tax.
Yes the title deeds still show the companys name.
Customer: replied 2 years ago.
40% company. 20% each of 3 brothers including me.
Expert:  Tony Tax replied 2 years ago.
Leave this with me while I draft my answer. It will take a while as this is somwhat messy so please bear with me.
Customer: replied 2 years ago.
Thats fine I would rather recieve a comprehensive and well researched answer thus avoiding me more hassle in the future. Dads finances are a mess and neither of us brothers can afford to pay this tax as 1 of my brothers is living in that house due to his long term illness. He cannot pay and he cannot move either.
Thank you for your efforts.
Expert:  Tony Tax replied 2 years ago.
Can you tell me if either you or your brother were directors and shareholders in the company which owns 40% of the property.
Customer: replied 2 years ago.
Yes 1 brother was a director at the same time as my dad and he now lives in the house. Basically the company was my dads and my dad got ill and he took over but in 2008 he got ill too and the company was closed as it was just a small company and could not sell it. My brother was a shareholder in the company I think it was his and my dads 50/50
Expert:  Tony Tax replied 2 years ago.
I will get back to you later today with my answer.
Customer: replied 2 years ago.
That would be great. Thank you. Will you be emailing me?
Customer: replied 2 years ago.
Or do I have to log back in here
Expert:  Tony Tax replied 2 years ago.
You'll get an email when I've posted my answer and then you can log back in here. You don't need to hang around and my answer will take some time to draft. There is no need to respond to this message as that will force me to reply.
Expert:  Tony Tax replied 2 years ago.
Hi again.
I'm not sure that I can provide a definitive answer. So long has passed since the company was closed down. The property should have been dealt with at the time by either:
1 being sold to a third party with corporation tax consequences for the company on its share of the gain and capital gains tax consequences for the individuals who owned 60%. The cash remaining in the company after settlement of the CT liability could have been distributed to shareholders as a dividend with potential higher rate tax implications.
2 the property could have been sold to the brothers which would have been deemed to have been done at market value, certainly as far as the director brother is concerned.
3 the property could have been distributed to the company shareholders as a dividend in specie, ie the property is a non-cash dividend as opposed to it being sold by the company and the cash distributed to the shareholders, with potential high rate tax implications. There would have to be undistributed profits on the books at the time as dividends cannot be paid if there are no profits.
There may have been stamp duty and VAT implications (for a commercial property).
As to how to handle this now, that's a difficult one. HMRC may get wind of the disposal of the property through their access to property databases. A change of ownership will show up on the Land Registry. It will be interesting to see if Land Registry query an attempt to take the company's name off the title deeds and others added given that the company no longer exists.
However you do it, when you sell the property you will need to report any gains you each make and HMRC may will require calculations and may ask for further information. The fact that your brother has lived in the property would help him as far as reducing his CGT liability is concerned as he will be entitled to main residence relief.
If it were me, I'd act as if the transfer of the property out of the company occurred in 2008 at its value at that time. You'd need to consult an accountant or tax adviser to have them look at whether the transfer should be done as a dividend in specie (to shareholders only and only if there were undistributed reserves) or as a transfer (deemed sale) to the brothers at its 2008 market value. You could then use the 2008 value as the CGT cost. Whether HMRC ever pursued a company that doesn't exist or its directors for corporation tax on the gain is a concern.
I'm sorry that I cannot give you a definitive answer but the situation is unusual.
I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
Hello TonyI appreciate that time has passed but what we should have done is kind of irrelevant now and its too late to change. Obviously I know that the property will be valued at 2008 as the company was closed then.We need to address what can be done or what will happen now.So basically if we change the names on the deeds say we remove the company and add a name, will Land Registry ask questions and do they inform HMRC.Also what rate will the 2 brothers pay CGT on, i guess its the profit they have made since we bought it and pay ???? % tax on profit.Also companies house did not inform HMRC about closing the company as we have had no comeback so I am presuming that they will not be checking with companies house of closure. I am confused here.Can you please clear this up for me.I need to know more of what we can do now and what % we are liable for.I appreciate this is difficult but I need help here.Thank you
Expert:  Tony Tax replied 2 years ago.
I gave you a summary of what you could have done or should have done so you could see the potential tax implications since they may still have to be dealt with regardless of the time that has passed if HMRC show an interest.
HMRC have access to Land Registry databases. Whether they are notified directly or not of changes I cannot say as they are cagey if you ask them. Land Registry may ask questions as the company no longer exists. This is a very rare situation so there is no certainty as to what any government department will do. They are short staffed and nothing may happen ever if you are lucky.
The first £11,100 of gains made by an individual in the 2015/16 tax year are tax free.
There are two rates of CGT, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year that the property is disposed of, say 2015/16. One of the following scenarios will then apply:
1 If the sum of your income and the net taxable gain in 2015/16 is £42,385 or less, then all the taxable gain will be charged to CGT at 18%.
2 If your income alone in 2015/16 is £42,385 or more in 2015/16, then all the taxable gain will be charged to CGT at 28%.
3 If your income alone in 2015/16 is less than £42,385 but greater than £42,385 when the net taxable gain is added, then part of the net taxable gain will be charged to CGT at 18% and part at 28%.
Without detailed figures, knowledge of your personal financial situations, the property value in 2008 and now and the company retained profits position in 2008 I cannot possibly do any calculations. As I explained in my previous post, there are several ways the property or the money from it can be taxed when it is removed from the company. You said yourself the situation is a mess. All I can really do from here is give you a few pointers. That's why you should go to see a local accountant or tax adviser and take any paperwork you have with you so that they can suggest a way forward. Potentially, there will be alot of work involved and so it won't be inexpensive.
HMRC will have had an opportunity to object to the company being closed down at the time if it owed taxes. They may ask questions if and when the property is disposed of as they are made aware of property sales.
Customer: replied 2 years ago.
Hello TonySorry I have not rated your service as I was away for a few days.I do not want to give you a bad rating but I am not really satisfied with the response, I was expecting a definitive this can now happen and that will not.I appreciated its complicated but how can I move forward. I do not wish to pay silly levels of fees so what I can do myself.
What do you suggest?Thanks
Expert:  Tony Tax replied 2 years ago.
I don't want a poor rating as that will be completely unjustified and they affect my standing on this site. I've had very few, probably less than 1% of my accepted answers total. I know what I'm taking about and this case is a mess frankly. Many people come here and dump their frustrations on the experts here because they don't find the easy answers they want. I'm not in the habit of telling people what they want to hear because I work in a professional manner and always will.
I cannot tell you what to do as I'm not allowed to give advice. Any action you take must be based on your own decision. I cannot give you a guaranteed way of avoiding a tax situation if you change the names on the title deeds. I have no figures to work on so its impossible for me to give a definitive answer including tax figures and you don't want to pay fees to an accountant which is your only real option other than taking the company name off the title deeds and hoping that HMRC and Companies House never take an interest.
I told you what the different tax scenarios were had things been done properly at the time and any of those scenarios could still happen now if HMRC pick up the change of names on the title deeds and decide to find out more. I know some people in this situation would simply have the title deeds changed and to hell with the consequences because they may never happen. I can't say what I'd do personally because I'd hope that I'd never find myself in that situation.
If you don't want to pay for my answer, that's fine but I'd ask you to not rate it as poor because it isn't and has been given in good faith. You can just walk away from it and ask for a refund of your deposit.
Customer: replied 2 years ago.
TonyI am a little confused, I have paid you already £33 and I have checked with paypal.Also I am not giving you a poor rating, you have given more than enough for £33I am just saying that I do not have a definitive answer.I am confused even more now.Absar
Expert:  Tony Tax replied 2 years ago.
I don't get paid unless you accept an answer I post. All you have done is make a deposit with justanswer which you can ask to be returned to you at any time.
I am an independent contractor who only gets paid for answers which the customer accepts or rates positively. As I said, you can ask for a refund of your deposit at any time.
You might note that another expert here has agreed with my answer. There is no definitive answer, just possibilities.
Customer: replied 2 years ago.
Who is the other expert who has agreed with your answer. I would like a response from this other expert.
Expert:  Tony Tax replied 2 years ago.
He has simply agreed with my answer. He won't elaborate. We don't post agreements to other experts answers without being sure of our position.