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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4087
Experience:  FCCA FCMA CGMA ACIS
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Good morning we run a ltd company that buys residential land

Customer Question

good morning
we run a ltd company that buys residential land with money from various people, develops the land and sells it for a profit. the convention is to issue project class shares to the people who have put in the money. Once sold the company pays CGT on profits and the shareholders can sell their shares back to the company paying another lot of CGT. Is there a way of avoiding this double CGT trap. Paying dividends is one solution provided all the shareholders want to get their money out but usually some shareholders want to their profits transfered to a different projects. What solutions do we have
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to assist you with your questions. Companies are not subject to the CGT regime, any profits of losses made merely form part of their trading activities. Individuals dealing in the companies shares are liable to CGT on any gain they make on disposal. Individuals have an Annual Exempt Amount of 11.1K to offset any gain. Might it be more convenient for the sums put in by individuals to be loans to the company. In such a case CGT would not kick in on repayment. However, I have a sneaking suspicion that for those rolling over their loans HMRC may well be of the opinion that their activities constitute trading in land and any profits made of their loans actually subject to Income Tax. Dividends can only be paid if the company has surplus moneys and furthermore dividends are not allowable against Corporation Tax. I suggest that the full advice of a trusted, local professional should be engaged in this matter.
Customer: replied 2 years ago.

Hi Keith

Thank you for your sound advice.

Abbas

Expert:  bigduckontax replied 2 years ago.
Delighted to have been of assistance.
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