Split freehold from ltd company? Is it do able?

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    Split freehold from ltd company? Is it do able?

    This was originally posted in the commericial property forum...please see the link below

    http://www.landlordzone.co.uk/forums...-Is-it-do-able

    Basically wanted to know if there are any tax implications for what is shown in that thread...I was told to post here by Jeffrey for more advice regarding the tax side of the issue.

    #2
    Hang on, I'm very unclear as to what you want to do and why. Please post in simple terms - ideally without using the word "basically" which adds nothing.

    Comment


      #3
      ok sorry for not making it clear. 10 years ago I bought a newsagents (in the form of a ltd company I purchased all the shares) paid £250,000. The company operates out of a building comprimising of a flat above and a commercial unit below, the flat is empty and used as a office. The retail part is the newsagents which I run. The building is owned freehold by the company. I want to divide the company in a sense, so the exsisting company continues to own the freehold, and a new ltd company is trading from the ground floor retail unit. At present the exsisting company owns everything within the building including stock etc.

      Jeffrey said it is a simple case of granting a lease to a new company who then pays rent to the exsisting company for use of the retail space. I would like to know if there is any tax implications for either the new or exsisting company with regards to this?

      My reason for doing this is because in the future I may want to sell the newsagents business but hold on to the freehold, this way I can word the lease in a positive manner to the freeholder (me).

      sorry if this wasnt clear Telometer

      Comment


        #4
        Thanks for this split-off thread. It should relate only to the tax aspects, of course.
        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
        4. *- Contact info: click on my name (blue-highlight link).

        Comment


          #5
          You should seek face to face advice from a Tax accountant as there may be lower tax rates for business sale proceeds upon retirement of business persons.

          Comment


            #6
            Originally posted by amz View Post
            My reason for doing this is because in the future I may want to sell the newsagents business but hold on to the freehold, this way I can word the lease in a positive manner to the freeholder (me).
            You will struggle to sell the newsagent if the terms of the lease are not fair.

            This is potentially quite complicated from a tax perspective, you should not contemplate this without using tax advisers who understand the following at least:

            1. Entrepreneur's relief, and the impact on that of selling the two elements separately.
            2. Close Invesment Company issues - you may find your property company will be paying corporation tax at the full rate, rather than the small companies rate.
            3. Degrouping charges - whether you should transfer the newsagent or the property to Newco, which may depend on values.

            N.B. How sure are you that a purchaser will buy the newsagent's in a company rather than preferring a trade and assets deal. Hiving the newsagent into Newco means it will be in a relatively cleaner company.

            Comment


              #7
              Originally posted by Telometer View Post
              You will struggle to sell the newsagent if the terms of the lease are not fair.

              This is potentially quite complicated from a tax perspective, you should not contemplate this without using tax advisers who understand the following at least:

              1. Entrepreneur's relief, and the impact on that of selling the two elements separately.
              2. Close Invesment Company issues - you may find your property company will be paying corporation tax at the full rate, rather than the small companies rate.
              3. Degrouping charges - whether you should transfer the newsagent or the property to Newco, which may depend on values.

              N.B. How sure are you that a purchaser will buy the newsagent's in a company rather than preferring a trade and assets deal. Hiving the newsagent into Newco means it will be in a relatively cleaner company.

              I do plan on seeing a tax specialist I was just wondering what other peoples views were.

              I don't plan to draw the lease up in a ridiculously unfair manner, just slightly biased in my favour. I'm not certain anyone will buy the newsagents in a company but having bought it myself as a company and knowing a few other shop keepers who have done the same, its an option I want to have ready. With regards to it being a cleaner company what do you mean?

              Comment


                #8
                Originally posted by amz View Post
                With regards to it being a cleaner company what do you mean?
                No track-record of any disputes, defaults, debts, etc. (because it's new): hence 'clean'.
                JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                4. *- Contact info: click on my name (blue-highlight link).

                Comment


                  #9
                  Originally posted by jeffrey View Post
                  No track-record of any disputes, defaults, debts, etc. (because it's new): hence 'clean'.
                  Thanks for clearing that up Jeffrey. I'm always amazed how you get any work done...your always on here helping people like me! You must be a workaholic

                  Comment


                    #10
                    I try, but precious few LZ members ever appreciate it; more prefer to criticise.
                    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                    4. *- Contact info: click on my name (blue-highlight link).

                    Comment


                      #11
                      Originally posted by jeffrey View Post
                      I try, but precious few LZ members ever appreciate it; more prefer to criticise.
                      Well I appreciate it! Don't worry about those who criticise their probably just jealous

                      Comment


                        #12
                        No, maybe envious?
                        'Jealous'= want to keep what one has.
                        'Envious'= want what someone else has (= to have the same).
                        'Covetous' = want to get what someone else has plus to deprive the other person of it too.
                        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                        4. *- Contact info: click on my name (blue-highlight link).

                        Comment

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