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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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Are the questions asked on this site confidential?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

My understanding is that they are. You have a customer number which doesn't identify you and your name isn't shown unless you choose to type it. You can ask just answer to close the question atfer you have an answer if you wish so that not even the expert who answers it can see it.
Customer: replied 2 years ago.
Many thanks, XXXXX XXXXX wanted to check it wasn't an open forum kind of site, any way, hi,
I own a limited company 100 %, my father used to be a part shareholder until about 5 years ago.

This week a mortgage company that we used for the purchase of buy to let property's when my father was company secretary has discovered that my father is no longer either a shareholder or director in the company and says that we are in breach of the mortgage terms and conditions.

They have given me 2 choices , either to take my mortgages elsewhere ( which is NOT an option due to recent poor credit) or secondly to restore my father to the shareholding and directorship of the company. He is early 80s retired and this is not something of us would want to do.

My first question is if needed am I able to transfer some shares to my father without him paying for them (as he could not afford to buy them and wouldn't want to) and him being taxed on them as it would in effect be a paper exercise just to satisfy the mortgage company for a couple of years until my personal finances were in better condition that I may be able to remortgage elsewhere with a different company.

Secondly how would the mortgage company know if the shareholding had been returned to how it was when the mortgage was taken out?

Many thanks

Sent from my iPad
Expert:  TonyTax replied 2 years ago.

Thanks.

The problem you have is that if you return the shareholding position to what it was 5 years ago by giving some of your shares to your father which you can do, you will be treated as having "sold" them to him at the open market value with potential Capital Gains Tax consequences.for yourself. The "disposal" will also be a gift for Inheritance Tax purposes. If the company paid dividends, then your father would be entitled to a proportion based on his shareholding though it is possible for a shareholder to "waive" their dividend in favour of the other shareholders.

Companies House have to be notified of changes in directorships and shareholdings and that is probably how the mortgage company became aware of the fact that your father was no longer involved as a director or shareholder though it appears to have take some time for them to notice and/or take action. No doubt, they will ask for documentary proof of any reversion to the former position.

It is possible to claim entrepreneurs' relief or business asset holdover relief in certain circumstances for a disposal of business assets (shares in this case) as you will read here. However, the company must be a trading company. A company which owns buy to let property will almost certainly not qualify as a trading company.

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

Customer: replied 2 years ago.

Many thanks for the reply my further question would be what is the capital gains tax rate?

Expert:  TonyTax replied 2 years ago.
There are two rates of Capital Gains Tax, 18% and 28%. The rate or combination of rates that you will pay is dependent on the level of your income in the tax year that gains over and above the annual exemption are made. If you make gains in excess of the exemption of £10,900 in the 2013/14 tax year, one of the following scenarios will apply:

1 If your income including the taxable gain is £41,450 or less, then you will pay CGT at 18% on the taxable gain.

2 If your income excluding the taxable gain is more than £41,450, then you will pay CGT at 28% on the taxable gain.

3 If your income excluding the taxable gain is £41,450 or less but more than £41,450 when you add the taxable gain, then you will pay CGT at 18% on some of the gain and at 28% on the balance.
Customer: replied 2 years ago.


Am I correct in thinking it is my personal income you are referring to and not the income of the limited company?


 


Also I am carrying a personal capital gains loss of £15000 over , can I assume that I can make use of that? My wife also has a £15000 loss I don't suppose I can make use of that could I?


 


Last question if I delay this transfer to mid April 2014 (new tax year) is it likely that the capital gains exemption might increase and when would the CGT be payable , 2015?


 


you have been very quick to answer and of great help I will of course be rating you as excellent.


 


best regards


 


paul

Expert:  TonyTax replied 2 years ago.
It is your personal income I am referring to, not that of the company. A company pays corporation tax on capital gains with no exemption.

You need to have claimed your capital losses within four years of the end of the tax year or tax years in which they were incurred either though your tax return or by letter to the tax office. You cannot use your wife's capital losses against your gains I'm afraid. You might transfer some shares to her so she can generate gains to utilise losses but you would only use sufficient losses to reduce the gains to the annual exemption level. Intra spouse transfers of assets are tax neutral.

The 2014/15 CGT exemption will be £11,000. CGT for 2014/15 will be payable on 31 January 2016 whereas CGT for 2013/14 will be payable on 31 January 2015.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15758
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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