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bigduckontax
bigduckontax, Accountant
Category: Tax
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Hi Ive just sold my business premises 2 years after my business

Customer Question

Hi I've just sold my business premises 2 years after my business went into liquidation. I did let my property out on a rolling months basis before the sale of the premises to another company that was only to insure I was not burdened with the astronomical business rates and the property was not left vacant. I let it out at a reduced market rate as I had the property on the market prior to the liquidation of my company and was looking to sell it as quickly as possible. The property was held in my personal name rather than the business. I just want to know whether I would be eligible for er if not would I be able to roll over the money. I am unsure of what I could roll over the gain to since I held the property in my name rather than the business.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.

We are talking here about Capital Gains Tax (CGT). HMRC advise that you can only roll over a property gain in the following circumstances.

'Business Asset Roll-Over Relief

This applies when you dispose of some types of business asset, which you intend to replace. You may be able to 'roll-over' or postpone the payment of any Capital Gains Tax that would normally be due.

Who qualifies?

You can claim the relief if you're trading and you use both the assets sold or disposed of and the new assets in your trade. For example, you may be able to get relief if you sell your butcher's shop and buy a new one.

Conditions you must meet

You must buy the new asset between 1 year before and 3 years after the date you disposed of the old asset.

HM Revenue & Customs (HMRC) may extend this time limit in exceptional circumstances.

There are different additional conditions for different types of disposal. For example, land and buildings must be occupied as well as used for your trade.

How the relief works

If you've reinvested all of the proceeds from the sale or disposal in new business assets, you can 'roll-over' (or postpone) all the gain. There'll be no tax to pay at that time.

You may still be able to postpone part of the gain if either of the following applies:

You only reinvested part of the proceeds.

Your old asset has only partly been used for your business, for example, you rented out a property for a time and then started using it in your trade.

You only work out the tax due when you sell or dispose of the new asset.

You then work out the tax due by reducing the cost of the new asset by the amount of the postponed gain.'

However, HMRC guidance is quite clear that the premises must be used in your business. It is silent as to whether the property is held on the books of the business or by you personally. If you are trading as self employed then you do so hold and roll over relief would appear to be available if you intend to use the sale proceeds to buy property to conduct more business. The difficulty comes if you have held the property in a limited company, for it is would then be the company which makes the gain and would be entitled to any business roll over relief and not you personally. However, this does not seem to be the case here.

If you do decide not to reinvest you may still ease the taxation on the gain through the use of Entrepreneur's Relief which taxes the gain at 10% instead of the normal 18% or 28%, but that is beyond the scope of this question.

I do hope I have thrown some light over your problem.
Expert:  bigduckontax replied 2 years ago.

KPMG have advice on assets held by outsiders for the conduct of business viz:

 

'Personal companies

There are special provisions where an individual holds an asset which is used for the purposes of a trade carried on by his personal company. Section 157 provides that a gain accruing to an individual on the disposal of the old assets may be rolled over into the cost of new assets where both the old and new assets are used for the purposes of a qualifying activity carried on by the claimant's personal company and both old and new assets are used only by the same personal company. The company must be the claimant’s personal company both at the time of disposal of the old asset and the acquisition of the new asset. A personal company for these purposes is defined as one where the taxpayer has 5% or more of the voting rights. There is no requirement for the claimant to be an employee or officer of the company. There is no restriction where the company pays rent to the shareholder.'

So that covers the problem quite simply which was a slight worry towards the end of my original answer..

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