Development company, personal title.

oz0707

Good one for you accountants!

Can a company build property on ground which is owned by director. Sell, then iron out what the liabilities are? Or is it the case that the title has to be sold/transferred/loaned to the company beforehand?

Cheers

Blind1979

The company never held the land and therefore on sale (to a third party I assume) the gain would arise to the director.

You would have to either transfer the land in some form to the company to have the gain arise in the company or the company to charge the director a "management project fee" for undertaking the build. The project management fee would be subject to Corporation Tax.

I would have thought the management fee would form part of the base cost of the property for the director but someone who works in personal tax would have to confirm.

Nicola_Ed

Hi

Is there any reason why you want the company to build the property? Assuming the company makes a profit on the sale of the building it will have to pay tax on the profit. If you want to take the net profit out from the company you will then have to pay income tax. Also are you planning to borrow any money from the bank for the project?

oz0707

Nicola_Ed wrote: »

Hi

Is there any reason why you want the company to build the property? Assuming the company makes a profit on the sale of the building it will have to pay tax on the profit. If you want to take the net profit out from the company you will then have to pay income tax. Also are you planning to borrow any money from the bank for the project?

Is there a more efficient way to do it then?

Possibly, not decided at the minute.

oz0707

Blind1979 wrote: »

The company never held the land and therefore on sale (to a third party I assume) the gain would arise to the director.

You would have to either transfer the land in some form to the company to have the gain arise in the company or the company to charge the director a "management project fee" for undertaking the build. The project management fee would be subject to Corporation Tax.

I would have thought the management fee would form part of the base cost of the property for the director but someone who works in personal tax would have to confirm.

Good point.
Would a management fee of whatever the ground is worth be the norm?

Nicola_Ed

oz0707 wrote: »

Is there a more efficient way to do it then?

Possibly, not decided at the minute.

Hi - I think this is a question that is not suitable for this forum as there is a lot to consider. However I think you need to address:-

Stamp duty - possibly on the transfer of the land to the company. If there is no transfer then you will need to grant a lease to the company.

VAT - if you are building residential property.

Profit - will this be all yours or shared with family/business partners?

Financing - if you need to borrow money will the trading vehicle affect the options available?

HMRC may view this as trading income not a capital gain.

There are more minor points but I would keep it as simple as possible.