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CGT: Incorporation Relief for Business Property Lettings
Freefly101
Posts: 1 Newbie
in Cutting tax
Hi All,
Just joined because can’t find enough info on this situation I have come across. Please help.
Situation: Family of 4 between them own 25 properties, 8 are owned by all 4 people in the family, some are owned by only a couple of people and a few are owned only by a single individual of the family. My understanding is that as per a recent ruling, being Elizabeth Moyne Ramsey v HMRC [2013] UKUT 266, a property lettings portfolio can be considered a business, so if you want to incorporate you can get incorporation relief, providing you can prove that the property lettings are a business (done by proving you spend 20 hours a week on the managing of the portfolio).
This family want to sell their properties. The gain on each property will exceed their CGT personal allowances. No property is worth over GBP 2 million. Gains on each property could be up to GBP 500,000. Only 1 person in the family is a higher rate tax payer.
My questions are as follows:
1. Can they incorporate everything in the portfolio, i.e. properties owned by a single individual and some owned by all 4 people in the family? (I would have thought not)
2. Do they all have to be spending 20 hours a week each on the management of the collectively owned properties, or would it be enough if just one person spent 20 hours a week on the management?
3. Any ideas how to reduce the CGT bill?
The idea is to incorporate and then sell the properties and only incur the corporation tax rate charge (being 20 – 23%), rather than the 40% higher rate tax bill.
Thinking about their exit strategy, even if they did incorporate, the gains would just be deferred so I assume they would have to pay them at some stage, or could they just sell all the properties and wind down the business with no assets, other than the share capital ????
Any help much appreciated.
Thanks
Just joined because can’t find enough info on this situation I have come across. Please help.
Situation: Family of 4 between them own 25 properties, 8 are owned by all 4 people in the family, some are owned by only a couple of people and a few are owned only by a single individual of the family. My understanding is that as per a recent ruling, being Elizabeth Moyne Ramsey v HMRC [2013] UKUT 266, a property lettings portfolio can be considered a business, so if you want to incorporate you can get incorporation relief, providing you can prove that the property lettings are a business (done by proving you spend 20 hours a week on the managing of the portfolio).
This family want to sell their properties. The gain on each property will exceed their CGT personal allowances. No property is worth over GBP 2 million. Gains on each property could be up to GBP 500,000. Only 1 person in the family is a higher rate tax payer.
My questions are as follows:
1. Can they incorporate everything in the portfolio, i.e. properties owned by a single individual and some owned by all 4 people in the family? (I would have thought not)
2. Do they all have to be spending 20 hours a week each on the management of the collectively owned properties, or would it be enough if just one person spent 20 hours a week on the management?
3. Any ideas how to reduce the CGT bill?
The idea is to incorporate and then sell the properties and only incur the corporation tax rate charge (being 20 – 23%), rather than the 40% higher rate tax bill.
Thinking about their exit strategy, even if they did incorporate, the gains would just be deferred so I assume they would have to pay them at some stage, or could they just sell all the properties and wind down the business with no assets, other than the share capital ????
Any help much appreciated.
Thanks
0
Comments
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There is so much relevant information you have not included in a query which is the most obvious I have seen on here that ought to be dealt with by a qualified accountant.The only thing that is constant is change.0
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