CGT Down the line

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    CGT Down the line

    I am about the transfer 2 properties into a Ltd company :

    1. Value £140k no capital gains to be paid when being tranfered into Ltd and no loan
    2. Value £220k capital gain of around £8k to be paid when transferring into Ltd company and a loan of £60k in the new Ltd company

    I need to know what the tax implications are going to be when I sell them from the Ltd company in years to come.

    #2
    Ignoring any SDLT on the purchases (which can be offset against any future sale), the gain on sale is income for the company (not a capital gain) and so is subject to the relevant rate of corporation tax.

    When the profit is transferred out of the business that will (normally) be either dividend or income for someone, who would pay tax on that as relevant.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Originally posted by jpkeates View Post
      Ignoring any SDLT on the purchases (which can be offset against any future sale),
      You can ignore it if it is tax deductible if you like, but OP might find the up front cash expense of £4,500 for the cheaper property and the £8,500 charge for the more expensive property somewhat less palatable!

      Originally posted by jpkeates View Post
      the gain on sale is income for the company (not a capital gain) and so is subject to the relevant rate of corporation tax.
      No, for all that it is subject to the relevant rate of corporation tax, it is a capital gain not income for the company - assuming it is a BTL, not a flipper or a doer-upper.

      Go talk to an accountant whom you are paying before following this approach.

      Comment


        #4
        It's a capital gain in the sense that it's an asset that has increased in value, but limited companies don't pay CGT, they pay corporation tax on their profits (which would include the income from the sale of an asset offset - hopefully only in part - by the loss of the asset from the balance sheet).

        But yes, accountant needed (probably to do the basic bookkeeping as well.)
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          Originally posted by Cameron9988 View Post
          .............

          I need to know what the tax implications are going to be when I sell them from the Ltd company in years to come.
          If you can find where the CGT rules are documented for when you sell in years to come please let us know. £25 to an agreed housing charity if you find a reliable source.

          Nobody knows: You can either plan on the basis of current rules, or assume a chancellor will tighten up on landlords using Ltd companies and assume it's going to become painful.
          I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

          Comment


            #6
            Originally posted by jpkeates View Post
            It's a capital gain in the sense that it's an asset that has increased in value, but limited companies don't pay CGT, they pay corporation tax on their profits
            It is still a capital gain. Or, pedantically, a chargeable gain, the Taxation of Chargeable Gains Act 1992 applying. Not your pretty phrase "income from the sale of an asset". The mechanic of computation is quite different from computing trading - or other income - profits (for all that in a simple situation the result is still proceeds less cost).

            Comment


              #7
              Pedantic is always good.

              You are (obviously) absolutely correct, but introducing and then explaining chargeable gain just makes things more complicated when the real world effect is identical to it being profit and taxed accordingly.
              It's not 100% accurate, but it helps people understand.

              If it makes you feel better, I am continually corrected for using the expression small claims court as though it was an actual separate court, which it isn't.
              I'm completely wrong (and always happy to be corrected), but it makes a lot more sense to the people I am trying to help.

              And your point about the OP not being happy with the SDLT is quite right, I always wonder why people consider incorporating without a long conversation with an accountant.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                You were the one who insisted on introducing the terminology 'capital gain' specifically saying that it was not one; just plain wrong - you could have glossed over it.

                There may for instance be capital costs following acquisition - or subsequently - that were disallowed at the time that may be brought into account on the final disposal.

                Comment

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