Want to sell property, can I pocket the money?

doozeruk

Hi

I am back again for another answer from a question I don't know about!

In a previous thread I mentioned how I am a partner in a 90 year old family buisness with my father.

I have been having some thoughts of recent about a workshop property we own. The property is fairly large at around 90ft x 40ft and sits in a prominent (but possibly not desierable) village location. It is only used as a store recentley as all of our work is on site at private addresses as such, we occasionally use it for making the odd window or door in.

My question is this.......As my family is expanding, I would like to sell the workshop, obvisouly after my fathers co-operation, and split the money 50/50 as the partnership is set out, so that I could put the funds towards a bigger house with a smaller workshop of some description on the property. Hopefully dad would then be able to pocket his half and do as he pleases with it. I am thinking this is going to be a big no-no though as surely somewhere along the line there is going to be a clause to say the property is owned by the business and not us. Can anyone help me with this please?

The buisness is not folding BTW, far from it, we are still thriving!

Thanks for any comeent or help.

Savvy_Sue

I think you need to look at what the deeds say ...

doozeruk

Thanks for your reply.
Haha....... thats a laugh!

My dad last saw the deeds around 20 years ago, not sure why, but he said they are nothing but a pencil drawing and scribbles on an (very) old piece of paper. The workshop was built around the 1830's!!

bridiej

I've moved this into the property board as you should get more replies in here.

Bridiej

sneekymum

Even if the property is owned by the business you can still have it back - but it could be taxed as income or Capital Gains or both - and then either way there's certainly Capital Gains Tax to pay on the sale - then at the end of the day there might be some money left to split 50/50 and do what you like with.

If you're going to pay out a whack in Capital Gains on the sale of a property don't forget to make a big pension contribution first to get yourself out of the higher income tax bracket - much better to pay 20% CGT than 40%. Have a look at recent threads in the Cutting Tax forum. But above all...

You need an accountant.

doozeruk

Thanks for you reply, I have an accountant but this is still in its infancy (my head) stages.


Looks like we could be punished then for owning a property for which we no longer have great need. Typical, may not get a bigger house afterall then!

Thanks

ioscorpio

Can't you just personally buy the workshop from the business for a nominal amount and then either convert the workshop into a private dwelling or sell on straight away and then pay back your father's half of the true value? Or is that tax evasion?

sneekymum

Yes that's tax evasion - you have to pay a market price unless you are totally unrelated.

Titan

It all depends on your business model and how you and your dad have it set up. If you are "sole traders" and work in a "partnership" then the property is yours and you can do as you like with it.

If however you have "incorporated" and the property is owned by the business, then it's a little different, but you can still sell and then take the proceeds as income according to your split of the business.

Obviously before you do anything go and speak with an accountant/advisor in order to get the most tax efficient way to sell.

Cheers

doozeruk

OK.....I realise this thread is a year old, but then so am I a year older and I am reconsidering all over again.

My situation remains the same as in the first post, and the reply I 'liked' the best was Titans! I didn't bother to follow up with accountants as other things took over my life at the time so i was just wondering whether anybody has any more to add on the subject?

I researched a bit more on the web and read about where an asset can be transfered to my wife and then not pay CGT, if this is the case would she then be able to sell the property and not incur any taxes?

In answer to Titans post yes we are sole traders in a partnership with no ltd, inc or corp at the end of name:o

thanks

wisbech_lad

You need to go talk to your accountant. Yes, you can transfer the property to your wife, but then when she sells it she will be the one to pay CGT.

But given that you have owned the place for a long time, you should get reasonable "taper relief" on the tax bill, no need to transfer. In fact transferring probably worse, as it will be seen as her getting the property for free, and selling for X, so her profit is X, and she has only owned for short while. As you have owned for a long time, the taper relief should reduce the CGT bill.

Why not rent to someone wanting storage? But that would be illegal if you didn't declare it.