Fathers company buys a flat for son to live in. Possible?

arambol

Hello,

My father has retired but has funds in his old company bank account. The company is no longer operational. However to draw the money out of the company account as cash he understands that there will be a significant amount of Capital Gains Tax to pay and he wishes to avoid this as much as possible.

So he is looking to use the money (circa £200k) to purchase a property with the idea that I (his son) will live in the property.

He doesn't wish to make money off this investment. He is just trying to put the money to better use and help me in the process. Ideally avoiding (or delaying) the Capital Gains Tax and in the long term reducing IHT.

Are we barking up the right tree here?

If so what are the restrictions or tax implications of this? I guess it is not a "gift" if the property is purchased through a company?

Appreciate any guidance.
Thank you.

Savvy_Sue

I'd say this was a situation where neither you nor your father can afford NOT to pay for proper financial advice. What advice has his accountant given?

xylophone

My father has retired but has funds in his old company bank account. The company is no longer operational.

No longer trading? Dissolved?

To whom or to what does the money in the bank account belong? To your father personally? To the company?

Would the flat be purchased and owned by the company?

If the money belongs personally and beneficially to your father and not the company, how exactly did it arise? On a winding up? On a sale of shares? As dividends? As income or bonus?

Before doing anything I would take advice from an accountant and a solicitor.

thenudeone

Removing money from the company bank won't stop any CGT liability.

Why would CGT be incurred anyway? Is the company going to be sold?
If the company owns the property it's still part of the assets of the company in the same way a bank account is.

IHT won't be affected. Assuming your father still owns the company and that all his estate passes to you (for simplicity), then if he dies all of his assets will count for IHT purposes. It doesn't matter whether that's £200k cash in his bank, 100% of a company with £200k in the bank, or 100% of a company which owns a property worth £200k -the IHT will be the same.

I think you really need to speak to a professional adviser about how to proceed. You don't seem to have an understanding of CGT or IHT, and the cost of getting it wrong could be an IHT bill of many tens of thousands of pounds. A few hundred pounds spent on a good adviser would be money well spent.