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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4207
Experience:  FCCA FCMA CGMA ACIS
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This is a question purely about tax and not planning

Customer Question

Hello,
(This is a question purely about tax and not planning permission)
I own a Ltd UK company and want to build on my own land in the UK near my home but not in the curtilage of the house/home. The land is 100 acres and 1 acre would be used for this purpose.
I do not personally have the cash but the company has cash that could be used.
I would like to build on the land using the companies own money and arrange a 12 year rental agreement where the company operates from the new building free of additional charges as they paid for 12 years in advance. 12 years of our current commercial rent would cover the building costs.
Can I do this or arrange a similar solution with the outcome being that after the agreed 12 year period, I continue to rent the building at a market rent to my company or use the building for another client or purpose.
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.

The only problem that I see with the proposal would be if HMRC define the activity as a loan to a director. In such a case the loan must be repaid within a fairly short time. If a company lends money to a participator the company will have to pay a s419 charge of 25% tax on the loan. Failure to pay it will almost certainly result in penalties and interest.

The s419 charge is not payable on any amount repaid within nine months of the company’s financial year end which is the normal due date for payment of the company’s Corporation Tax (CT) assessment.

I do hope that I have shed some light on your proposal.