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What are the tax implications of moving rental properties

Customer Question

Hi, what are the tax implications of moving rental properties from one company to another company that are owned by the same shareholder?
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. Before I can fully address your question I need to know if these companies form part of a company group, not merely owned by the same person.
Customer: replied 1 year ago.
Hi, my client is selling one company but wants to move the freehold properties out first and put them in another company, so no, it will not form part of a group
Expert:  bigduckontax replied 1 year ago.
Thank you; as you are probably aware companies are not exposed to the Capital Gains Tax (CGT) regime, all such transactions being passed through the company's trading accounts and subject to Corporation Tax (CT). To achieve this he could move the properties from Company A to Company B at the price shown in Company A's books without disturbing the profit level in that company. Indeed, I have done this for a company and the Inland Revenue, as they were then, did not bat an eyelid. However, you may be caught by Stamp Duty Land Tax (SDLT) as the exemption from this on inter company transfer depends upon the companies being with in group. However, no SDLT is applicable if no money or other payment changes hand as would appear to be the case here.
Customer: replied 1 year ago.
Thanks Keith, I think it is just a simple transfer to protect the properties from Company A's new owners, I will come back to you if I may, once I have full detailsRegardsMatt
Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance, Matt. Please be so kind as to rate me before you leave the Just Answer site. You can still follow up thereafter if you so require.
bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support, Matt.
Customer: replied 1 year ago.
Hi KeithI've got more details now
RS owns company A which holds the freehold to 2 properties, RS also owns company B. JC wants to buy company A to gain the freehold of one property. RS wants to transfer property 2 to company B in the most tax efficient manner. The companies are not in a group and both properties are rental properties.CheersMatt
Expert:  bigduckontax replied 1 year ago.
Actually Matt, they are in a Company Group, please see HMRC advice CMT18320 which you can find here: http://www.hmrc.gov.uk/manuals/ctmanual/ctm18320.htm This defines a company group for tax purposes. So we now fall back on HMRC's directive which states: 'The no gain/no loss rule in TCGA92/S171(1) ensures that assets can generally be moved around a group of companies without any immediate capital gains consequences. ). This recognises that business activities carried on within the overall economic ownership of a corporate group, within the charge to corporation tax, should, in broad terms, be tax neutral. This is achieved by fixing both the consideration received for the asset by the transferor and the consideration given for the asset by the transferee. The transferor has neither chargeable gain nor allowable loss. The transferee effectively takes over the transferor’s capital gains cost, augmented by indexation allowance as appropriate.' Thus there is no capital gain or loss in these transactions.
Customer: replied 1 year ago.
Thats great, thanks KeithSo, it will be just the capital gain on the sale of the company
Expert:  bigduckontax replied 1 year ago.
Yes, but only when it is sold out of the group.

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