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TaxRobin
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Experience:  International tax
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Dear Just AnswerI am 55 years old and have been in a business

Customer Question

Dear Just Answer
I am 55 years old and have been in a business partnership for over 30 years and in that time have acquired joint assets with approximate values as listed below along with our current liabilities and would now like to end our business partnership and divide our jointly owned assets and liabilities.
We jointly purchased a residential property in August 1997 on a 50/50 ownership which was financed by a joint mortgage and it is our joint names that are on the deeds. The property consisted of a small house and adjoining barn along with a yard and approx 2 acres of land and the intention was for my partner and his family to move into the main house and for me to convert the barn as a residential dwelling for myself. In the meantime my partners Wife became pregnant and additional space was needed so it was agreed that i would surrender the barn and the house would be extended into the area that the barn stood and in the future I would apply for planning to build a property on the available land. The property has been my partners family residence ever since. In the meantime further land became available which was also purchased jointly. The first piece of land was purchased with a remortgage of the house and was in joint names on a 50/50 basis and the additional piece of land was purchased with a bank loan financed by personal drawing from the business only this piece of land was purchased in the names of myself,my business partner and his wife. The split being 50% to me and the remaining 50% belonging jointly to my business partner and his wife .This loan was paid off in 2009 using part of a £400k loan taken out against the business freehold property and the rest was used to clear the business overdraft and reinvested in the business to continue trading through the recession as we suffered a severe drop in trade from 2008 of which £332458 is the balance owed as of today.
Planning permission was applied for to build a bungalow as a dwelling for myself and the permission was refused although later applications resulted in permission granted to convert an existing barn into annexe accommodation to the house. Unfortunately this wouldn’t be suitable or permitted as an additional family home. After moving into rented accommodation in Exeter for 2 years we then decided to purchase another property temporarily for myself and my family to live in for approx 2 years to reassess the situation and to decide the best course of action for the future. This property was purchased from a remortgage of the house and is in the joint names of myself and my business partner
The business that we own jointly on a 50/50 partnership operates from a property we purchased freehold in approx 1995 with a business loan and has subsequently been used as security for a £400k loan as mentioned previously this which was injected back into the business during 2009 and the loan balance is as shown below.
I am unmarried but have a partner of 15 years and 2 daughters and I am also concerned as to the tax implications on my family should i die before my business partnership has been ended. And also the implications should John Boucher die on how the estate would be divided up and again the tax implications on both parties.
Jointly owned assets Approximate values
3 bed bungalow that i am living in approx value £275,000
Jointly owned property purchased 1997 with adjoining paddock/field £850,000
Additional land plot 1 £100,000
Additional land plot 2 £100,000
Freehold Business Premises £400,000
Business Stock at valuation £200,000
Liabilities
Bank loan £332,458.00
Mortgage £269,090
Total liabilities £601,548
Total assets £1,925,000
Balance £1,300,000
=£650,000 each
My Proposal is for me to sign over Haylodge property and land plot 1 to my business partner and for him to take on the repayment of the remaining mortgage and for my business partner to sign over over to me the bungalow I am living in,the business premises and stock and land plot 2
As a rough calculation this would give my business partner £950,000 worth of asset value with a debt of £269,000 leaving a value of £681,000
And myself an asset value of approx £975,000 and a debt liability of £332,458.00 leaving a value of £642,540.
This is an example proposal to establish tax liabilities should this be agreed and to take any advice that you may offer on a alternative solution.
The values given are approximate and without professional valuation and have been estimated using figures from recent sales of land and property from Land Registry and property websites.
Submitted: 2 years ago.
Category: Tax
Expert:  Nicola-mod replied 2 years ago.
Hello,
I've been working hard to find a Professional to assist you with your question, but sometimes finding the right Professional can take a little longer than expected.
I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.
Thank you!
Nicola
Customer: replied 2 years ago.

Hello Nicola

I am happy to wait

Kind Regards

Derek

Expert:  Nicola-mod replied 2 years ago.
Hello,
We will continue to look for a Professional to assist you.
Thank you for your patience,
Nicola
Customer: replied 2 years ago.

Many Thanks

Expert:  TaxRobin replied 2 years ago.
Hello and thank you for allowing me to assist you.
Your questions would really be best asked with a solicitor where you and your partner could both be present.
As a rough calculation this would give my business partner £950,000 worth of asset value with a debt of £269,000 leaving a value of £681,000
And myself an asset value of approx £975,000 and a debt liability of £332,458.00 leaving a value of £642,540.
You have shorted yourself in the above.
For estate purposes, assets are anything that has a value, such as:
money in bank, building society or savings accounts
houses and land, including farmland
businesses, or business assets, owned by the deceased (or a business partnership of which they were a member)
investments such as stocks and shares, including family shares
personal belongings, including jewellery, antiques and other collectibles
furniture, fixtures and fittings in a house
motor vehicles
pensions that include a lump sum payment on death (as opposed to an ongoing annuity to a surviving partner)
assets in a trust from which the deceased benefited
payouts from life insurance policies
foreign assets held abroad including foreign bank accounts, property or shares
As you can see from the long list above the partnership holdings will have a bearing on your estate (or his).
You really need more personal assistance than is available in a Question & Answer site.
Customer: replied 2 years ago.

All the items you have mentioned aren't relevant in this case and I only seek advice on the initial question regarding the potential capital gains tax implications on transferring ownership of the properties as described.

Expert:  TaxRobin replied 2 years ago.
Thank you for the additional information.
Where a partnership distributes an asset in kind to one or more of the partners, for example on dissolution, a partner who receives the asset will not be regarded as disposing of his fractional share in it. A computation will first be necessary of the gains which would be chargeable on the individual partners if the asset had been disposed of at its current market value. Where this results in a gain being attributed to a partner not receiving the asset the gain will be charged at the time of the distribution of the asset. Where, however, the gain is allocated to a partner receiving the asset concerned there will be no charge on distribution. Instead, his Capital Gains Tax cost to be carried forward will be the market value of the asset at the date of distribution as reduced by the amount of his gain. The same principles will be applied where the computation results in a loss.
Each property owned by the partnership would present a CGT to the partner that relinquished his portion.
Customer: replied 2 years ago.

The main property we jointly share was purchased for £130k and is now valued at £900k. It has been used as my business partners family home since 1997. Should i sign over my 50% share of this property in return for my partner signing over to myself our business premises will i incur a capital gains tax bill and vice versa. No money will change hands.

Regards

Derek

Expert:  TaxRobin replied 2 years ago.
Yes you would because your part was not your main home. Your transfers would be on portions that were not your own personal residences.
Customer: replied 2 years ago.

would i be liable to capital gains on 50% of the sale value of the property value or the profit from the initial purchase price and if i moved into the property for 2 years would this be make me exempt from cgt?

Regards

Derek

Expert:  TaxRobin replied 2 years ago.
You would calculate on the 50% you owned and transfer. The initial purchase and the difference in the sale price (value in your situation as you will not be receiving cash)would be your gain. Your purchase price would be your percentage of purchase too.

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