How can a Dormant company receive a premium?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • luketj
    replied
    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?

    Leave a comment:


  • Muggsy
    replied
    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.

    Leave a comment:


  • luketj
    replied
    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?

    Leave a comment:


  • Muggsy
    replied
    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.

    Leave a comment:


  • luketj
    replied
    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?

    Leave a comment:


  • luketj
    replied
    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?

    Leave a comment:


  • Gordon999
    replied
    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. .

    Leave a comment:


  • Muggsy
    replied
    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.

    Leave a comment:


  • luketj
    replied
    Yes, the subject has broadened slightly from the original question.
    Right, so you are saying a section must disapply section 17 for it not to be subject to it. Do you know any legal cases where section 17 dominated over section 38?
    The reason I'm asking is because it makes a big difference to the tax implications of my situation. If I can be sure that section 17 dominates over section 38 then there is a greater likelihood that my tax situation will be market value - market value = nil, which I will rejoice greatly over!

    Thanks for your time.

    Leave a comment:


  • Muggsy
    replied
    Originally posted by Lawcruncher View Post
    There is no need to get bogged down in tax legislation to determine whether a company is dormant. The sections quoted in post 17 are what determines whether a company is dormant.
    Completely agree. But I'm guessing that luketj's concern is more around the tax.

    Leave a comment:


  • Muggsy
    replied
    Originally posted by luketj View Post
    The section specifically says "section 17 applies", so it doesn't answer my question "So how does one know what provisions of the act section 17 is subject to?"
    I can see you believe that section 17 will apply to my case, but on what grounds can we say that section 38 is subject to section 17? Because they contradict one another.
    I think you need to re-read it. Section 144ZA(2) and (3) between them disapply s17 four times. There is nothing in s38 that says anything like that.

    And did you find s149A? It came in with Finance Act 1993?

    Leave a comment:


  • Lawcruncher
    replied
    There is no need to get bogged down in tax legislation to determine whether a company is dormant. The sections quoted in post 17 are what determines whether a company is dormant.

    To summarise, if you do anything other than the bare minimum needed to keep the company on the register the company is not dormant. There is no insignificant transaction exemption.

    Leave a comment:


  • luketj
    replied
    The section specifically says "section 17 applies", so it doesn't answer my question "So how does one know what provisions of the act section 17 is subject to?"
    I can see you believe that section 17 will apply to my case, but on what grounds can we say that section 38 is subject to section 17? Because they contradict one another.

    Leave a comment:


  • Muggsy
    replied
    Originally posted by luketj View Post
    I tried but I cannot find them. I cant see any mention of ZA.
    Have a look at s158 Finance Act 2003.

    Leave a comment:


  • luketj
    replied
    I tried but I cannot find them. I cant see any mention of ZA.

    Leave a comment:

Latest Activity

Collapse

  • Reply to Flipping a property
    by Gordon999
    Land Registry only allows 4 names maximum on the property title.

    If more than 4 names , you would need to register under company name and the members in the group become shareholders.

    The members can be shareholders with one £1 share each and the company borrows the funds...
    30-05-2020, 05:59 AM
  • Flipping a property
    by Gray
    My son and I are thinking of buying a property together and renovating it. We were intending to rent it out but now are thinking about just selling it again once work is finished. If we purchase property in three names (our’s and his partner’s), we would get three capital gains allowances is that...
    18-05-2020, 17:53 PM
  • Reply to Flipping a property
    by jpkeates
    If the property title was a joint tenancy, anyone not contributing to the purchase would have received the ownership as a gift and would be an owner as a matter of fact.
    29-05-2020, 16:26 PM
  • Reply to Is changing carpets to laminate flooring tax deductible?
    by jpkeates
    OK, that makes a lot more sense.

    The HMRC guidance is focussed on improvements like new rooms or new bathrooms rather than more mundane changes.

    I would probably focus equally on the amount of the difference rather than the ratio - £500 is neither here nor there for tax purposes,...
    29-05-2020, 16:16 PM
  • Is changing carpets to laminate flooring tax deductible?
    by anqi_z
    Hello,

    Carpets in a let property has worn out and I am considering to replace it with laminate flooring.
    Could anyone advise if this will be tax deductible (assume this won't be considered as improvement)?


    Thank you....
    25-05-2020, 19:16 PM
  • Reply to Flipping a property
    by Stew
    thanks - interesting reading
    29-05-2020, 15:32 PM
  • Reply to Flipping a property
    by TaxAntics
    A good question! I read the post as being a purchase between a father, son and their partner and so assumed they'd all have an equitable interest. A partnership arrangement could easily have a variable profit sharing ratio that wouldn't necessarily follow equitable interests with partners’ capital...
    29-05-2020, 15:22 PM
  • Reply to Flipping a property
    by Stew
    A question if I may (not that I am disposing or buying but just sparked a question),,, is it enough to purchase the property in three names or do three names actually have to put funds into it at the point of purchase?

    If a property were bought by ten members of a family and all on the...
    29-05-2020, 14:38 PM
  • Reply to Is changing carpets to laminate flooring tax deductible?
    by TaxAntics
    That depends on how you choose to interpet HMRC guidance:

    However, where the new item is not substantially of the same standard/quality as the old item, the deduction is equal to the lesser of:
    • the cost of the new item
    or
    • the cost that would have been incurred if the old item had essentially
    ...
    29-05-2020, 13:32 PM
  • Reply to Is changing carpets to laminate flooring tax deductible?
    by jpkeates
    That's not correct.

    While it's not exactly like for like, one conventional floor covering is being replaced by another.
    Some incidental improvement is likely (as with any replacement) - the "improvement" wouldn't affect the value of the property materially....
    29-05-2020, 13:13 PM
Working...
X