How can a Dormant company receive a premium?

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    #31
    Great. But get some proper advice on your facts from someone competent. There are at least a couple of dozen tax cases that refer to s17. I have no idea whether any of them will have any relevance to you as I have no idea what facts you have. And there can be a whole heap of other relevant tax rules that apply.

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      #32
      I think you have nothing to worry about because your company has acquired some cheap land by adverse possession and sold a lease.

      Since you have not sold the land , there is no capital gains to report. Your company was declared dormant in last year's account.

      This year your company accounts will declare trading revenue of £1K and deduct the expenses say £250 , so must pay company tax to hmrc at 20% on £750 profit. But also accounts will show debtor owing £1K.

      Next year your company will declare dormant account because no rental income received from lease. .

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        #33
        Gordon, do you realize that granting a lease is a part disposal and therefore is liable to capital gains?
        And do you know that hmrc will use market value in their calculation in my case?

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          #34
          I'm having difficulty understanding Section 10(2) of Schedule 8:
          "any sum (other than rent) paid on or in connection with the granting of a tenancy shall be presumed to have been paid by way of premium except in so far as the other sufficient consideration for the payment is shown to have been given."
          Does this mean that any non monetary substitute "payment" will not be considered a premium?

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            #35
            Originally posted by luketj View Post
            Does this mean that any non monetary substitute "payment" will not be considered a premium?
            No.

            Imagine you want to lease out a building but you first have to pay £20,000 for an extension. You do the work and you get a £100,000 premium on the grant of the lease. That's a disposal of an asset with £100,000 consideration (even if Gordon999 thinks it is not).

            The deal could be restructured so that you get £80,000 and, instead, the tenant builds an extension that costs it £20,000. So you think that the consideration for the disposal is now £80,000 but para 10(2) says "no, that £20,000 you get is also premium and so the total premium is deemed to be £100,000". So your disposal consideration is £100,000. That makes sense as there is no economic difference.

            Imagine a third scenario where you get £100,000 and pay the £20,000 for the extension. The tenant notices that there are still some desks in the building that you are just about to move out. They are worth £1,000 and the tenant gives you £1,000 for them. Is the premium now deemed to be £101,000? The first part of para 10(2) says yes. But the bit at the end ("except in so far as other sufficient consideration for the payment can be shown to have been given") says no.

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              #36
              Thanks for your answer.
              But, how can that £1000, in your last example, be both "yes, it's part of the premium" and "no, it's not part of the premium" at the same time?

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                #37
                It's a rebuttable presumption that the £1,000 is part of the premium. By showing that the desks (in my example) were given in consideration for the £1,000 (i.e. it is not just the lease that the tenant is getting but lease plus desk) you have rebutted that presumption. So the answer to my last example is that the premium is only £100,000.

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                  #38
                  wow, what a jargon jungle!
                  In your example, you spoke from the perspective of the lessor receiving premium or not premium from the lessee. I have no idea who has the authority to "rebut the presumption"!
                  What about the perspective of the lessee paying the lessor? Can the presumption be rebutted (whatever that means), so that if the lessee gave desks and chairs to the lessor at the time of the grant of the lease, it could be considered the premium?

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