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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I have a client who wants to transfer two properties

Resolved Question:

Hi
I have a client who wants to transfer two properties worth approximately £650,000 from one limited company to another company. The cost of the properties was approximately half 25 years ago.
However, is there any tax payable, and if so, how much for performing this process?
Thanks
Kind regards
Paul
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. If these two companies are within a company group then the following situation arises. Stamp Duty Land Tax (SDLT) is not payable. As companies are not liable to Capital Gains Tax (CGT) then the sale of one will be undertaken and any gain or loss on completion applied to the trading account to be ultimately included in the annual Corporation Tax (CT) computation. As within a company group individual company's profits and losses can be moved upwards, downwards and sideways as convenient to reduce overall CT laibility it should all come out in the wash as it were. If these companies are not grouped then SDLT may well apply and any gains or losses passed through the trading accounts without the benefit of group relief. There will be conveyancing costs to consider also, although if these are land registered sites then you can use a Land Registry transfer for minimal cost, but you have to be 100% sure of the holdings. I have only done this once in a company group, but all directors were cognisant of the title to the land holding transferred. If I recall it cost us 40 quid, bet it's a bit more now! I do hope that I have shed some light on your problem.
Customer: replied 1 year ago.
Thanks for your prompt reply.
The two companies are not in a group and therefore Stamp Duty Land Tax would be payable but would they still be liable to corporation tax on their profits and is there no indexation allowance? Also one company is the pension fund fund for the other company.
Expert:  bigduckontax replied 1 year ago.
Indexation allowance has long gone except for properties acquired before March 1985, compensated for by a reduction in CGT rates which don't apply to companies anyway as I explained. The result of these transactions will leave one company with a gain liable to CT and the other with new fixed assets. Please be so kind as to rate me before you leave the Just Answer site.
Customer: replied 1 year ago.
I am not doubting what you say but the attached article https://www.gov.uk/tax-when-your-company-sells-assets/work-out-a-chargeable-gain says that you can claim indexation allowance. Is it relevant to this case?
Expert:  bigduckontax replied 1 year ago.
Indexation allowance only applies to properties bought before March 1985. In this case the allowance would be out of time as the property would appear to have been acquired in the early 90s. HMRC guidance in CG10943 says: 'Indexation allowance was introduced by FA82 following a period of high inflation. The allowance gave relief for the effects of inflation (from March 1982) in computing gains. For disposals between 6 April 1985 and 29 November 1993, it was possible for indexation relief to create or increase a capital loss . For disposals on or after 30 November 1993, this was no longer allowed and the most that indexation could achieve was to reduce a gain to nil.' As far as most of us are concerned indexation is a dead duck, sorry.
Customer: replied 1 year ago.
Thanks very much Keith but I need to check exactly when the properties were bought. If they were bought prior to March 1985 and they were transferred from one company to another now (not in a group), would that make any difference to the outcome?
Expert:  bigduckontax replied 1 year ago.
It might, but I doubt it, all depends upon the dates!
Customer: replied 1 year ago.
Hi Keith
I have discovered that the property was purchased in 1990 and so does that mean there is no indexation allowance available?
Finally, is there any relief if a company transfers an asset to a pension fund as in this case?
Thanks
Paul
Expert:  bigduckontax replied 1 year ago.
Correct Paul, the wording of CG10943 is quite clear: 'For disposals on or after 30 November 1993, indexation was no longer allowed.' Transferring into a pension fund has its attractions, but the value transferred may not exceed 40K in the current tax year although there may be slack available to mop up from the previous three years contribution levels. Remember your own contributions must be aggregated in and count towards the 40K limit. The value transferred is allowable against the donor company's Corporation Tax computation. Please be so kind as to rate me before you leave the Just Answer site.
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Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.