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bigduckontax
bigduckontax, Accountant
Category: Tax
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Company (A) is fully owned by Company (B) and both companys

Customer Question

Company (A) is fully owned by Company (B) and both company's has the same Directors.

The Director wants to transfer the property assets of company A to Company B at the book value when first purchased several years ago. The Director may choose to increase the transfer of the assets in line with indexation.

Can this be achieved

Mike Watts
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Certainly, no problem at all. If there is no doubt as to Company A's title to the properties then this can be achieved by means of a Land Registry transfer form, a very cheap method of conveyancing, the only fee payable being that to the Registry. You may also avoid SDLT as a 'linked transfer.' You would be advised to consult the companys' tax offices on the Stamp Duty element.

Company A has made a capital gain and is therefore liable to Corporation Tax on that gain. Were the companies in a company group this would have been avoided, but unfortunately this is not the case here. The gain, even though notional, forms part of the income of company A in the year of sale.

As a general guidance HMRC may well wish the transfer price to be calculated on current real estate values which may not necessarily correspond with one derived from indexation.

I do hope I have been able to help you with this problem and given you some useful guidance.
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.
Company (a) has been taken over by Company (b) one of the assets in company (a) is held on its books at £50,000 with indexation their would no capital gain if transferred at £65,000 the figure we would like to transfer it. The asset if sold would probably be valued by the HMRC at £150,000. We are not forced to transfer the assets
and would not if there is any danger a revaluation of the suppose asset upon transfer. But would have to be certain before we did any transfer. The motive for the transfer is reduce the assets in two companies to one eventually, If it does not trigger any corporation tax liability, otherwise we will have to keep both companies as they are.

Mike
Expert:  bigduckontax replied 3 years ago.
I am sorry, I have mislead you and I should have known better at my age! Company A and Company B form a company group. Here is a definition:

'The definition of business group varies. For instance, Leff defines business group as a group of companies that does business in different markets under common administrative or financial control whose members are linked by relations of interpersonal trust on the basis of similar personal ethnic or commercial background. One method of defining a group is as a cluster of legally distinct firms with a managerial relationship. The relationship between the firms in a group may be formal or informal.' A and B conform exactly to this description.

Please delete paragraphs 2, 3 and 4 of my original answer. Just do the transfer. There will be no capital gain involved until a property is sold out of the group altogether. By all means adjust the transfer price to reflect current values, but in reality this is unnecessary.

Sorry for the clanger!
Customer: replied 3 years ago.
Thank you for your help, I need a little more help on this, need to consult my Brother and partner on Tuesday can I reach you then

Regards

Mike
Expert:  bigduckontax replied 3 years ago.

No problem, Mike; I should still be in the land of the living!

 

Please be so kind as to rate me before you leave the Just Answer site..

Customer: replied 3 years ago.

Neville is a director on all seven of our Companies They have different functions i.e. one is building company 2 manage their own properties and so on. For tax purposes they are considered associated companies. My


Question is if we made two of our company either non trading or holding companies could we reduce our associated companies to 5 to be more tax efficient per company to qualify for small companies corporation tax relief.

Expert:  bigduckontax replied 3 years ago.
Within a company group, and from your post this one would appear extensive, you can juggle Corporation Tax (CT) liabilities up, down, sideways, forward or back as convenient to reduce CT liability in each company to nil and maximise tax efficiency within the group.

Please don't forget my rating!
Customer: replied 3 years ago.

 


Hi Bigduck,


 


Our companies do not send in group accounts but each company send in its own company accounts at its year end, some companies year end is in February others in April June and so on. Generally the different company's invoice one another for different services etc which does help


to make our tax liability as efficient as possible. We would welcome any good suggestions on how to improve in this regard.


 


Mike

Customer: replied 3 years ago.

Hi Bigduck,




 




Our companies do not send in group accounts but each company send in its own company accounts at its year end, some companies year end is in February others in April June and so on. Generally the different company's invoice one another for different services etc which does help




to make our tax liability as efficient as possible. We would welcome any good suggestions on how to improve in this regard.




 




Mike


Expert:  bigduckontax replied 3 years ago.
Then just keep invoicing up, down and sideways to reduce liability. After all, that's exactly what the big boys, Vodafone, Amazon and Starbucks do, except they bill from subsidiaries in tax havens!

You have to take a bit of care, but just persevere.
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.
Expert:  bigduckontax replied 3 years ago.
Very kind of you to pay a bonus. I was delighted to be able to help with your problems.

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