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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My home is a flat over a shop and the whole property is owned

Customer Question

My home is a flat over a shop and the whole property is owned by a limited company I own.I now wish to sell the flat,which is now worth twice what I paid for it.Do i pay capital Gains Tax?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

If the flat is owned by your company, then any profit from selling it will be subject to corporation tax as companies don't pay capital gains tax. Profits of a company up to £300,000 per annum are taxable at 20%. Take a look at the rates of CT here.

The 10% tax rate your accountanr mentions is the rate of tax you would pay if you sold your shares in the company assuming you qualified for entrepreneurs' relief. See HS275 for more on ER. It can also apply to assets owned by a director used in their business. Whether that would cover a flat would depend on the circumsrances. Since you will have only owned the property for a short while, the maximum amount of years that you would get main reidence exemption for would be three as you will read in HS283. There would probably be no gain as you will read in the next paragraph but that isn't as good as it may seem.

If you bought the flat from the company at less than the market value, the transaction would be treated as having taken place at the full market value with tax consequences for the company and for you as you will read here, here and here. Your cost for CGT purposes would be the full market value of the property but you may have to pay tax on the difference between the market value and the sum you pay as salary or dividend depending on whether your company is a close company or not.

I hope this helps but let me know if you have any further questions.

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