Stamp duty & CGT question

RabbitMad

I own / have inherited 1/6th of a company. THe other 5 owners are family members.

The company has the following assets:
- Freehold shop rented out earning approx £15k pa (Value of freehold about £150K)
- A loan agreement (Approximately £240K) being paid back at £2k per month with 6% interest charged

As the owners mostly are non or lower rate tax payers is holding the assets in the company the most efficient way of holding them?

My thoughts are we should extract them from the company by buying them for their probate value and then do a share buy back so no money really changes hands. What taxes would we incur if we did this?

jimmo

You seem to have a cunning plan, perhaps too cunning for me, but if I can pick a couple of holes...
If the company owns a freehold shop then, at some time in the past, it acquired the property at a cost or market value.
There can be no such thing as probate value in the present context because the property was not owned by the deceased at the date of death.
The company is therefore likely to realise a capital gain on disposal of the property and the company will be liable to CT on that capital gain.
If a company buys back its own shares from the shareholders cash has to change hands.
http://www.hmrc.gov.uk/manuals/ctmanual/CTM17505.htm

RabbitMad

jimmo wrote: »

You seem to have a cunning plan, perhaps too cunning for me, but if I can pick a couple of holes...

If the company owns a freehold shop then, at some time in the past, it acquired the property at a cost or market value.

Yes - about £80k from memory so the company will have CGT to pay when it sells the freehold to either the shareholders or somebody else.

jimmo wrote: »

There can be no such thing as probate value in the present context because the property was not owned by the deceased at the date of death.

I know what you mean, but for similicity as the deceased owned the whole company and in order to value the shares in the company a current value needs to be put on the freehold.

jimmo wrote: »

The company is therefore likely to realise a capital gain on disposal of the property and the company will be liable to CT on that capital gain.

As above

jimmo wrote: »

If a company buys back its own shares from the shareholders cash has to change hands.
http://www.hmrc.gov.uk/manuals/ctmanual/CTM17505.htm

thanks, so I'd need a bridging loan for 1 day so that the money is lent to the share holders. They buy the asset (presumably Stamp duty will be payable). The company can then buy back shares to the same value. The shareholders can pay off their loan.

I need to do some serious number crunching to see if this makes sense but I would suspect not.

Perhaps making the non / basic rate tax payers directors and paying directors remuneration might be the way to go?

John_Pierpoint

Would it not be better for the country if we had so many inventive brains doing something useful, as against playing poacher versus gamekeeper on tax matters?