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Sam
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Category: Tax
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I'm thinking about buying a campsite business £1.3m which

Resolved Question:

I'm thinking about buying a campsite business for approx £1.3m which includes 10 acres of land and a 4 bed house. The house and land is worth approx £750k-£800k without the business. What are the SDLT considerations, is it worth looking at splitting the purchase into two parts for the residential and business elements or buying the whole as a Ltd company?
Also any considerations around capital gains if/when we sell x years down the line?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.

Hi

Thanks for your question

What will the property be used for - your home - or part business part home ?

As this will determine the best way as to how you need to take the purcahse forward, and do you have any current main residence that you own or any other residential properties? If so, what will become of those on this purcahse.

Thanks

Sam

Customer: replied 1 year ago.
It will be part business and part home, our current home will be sold to help finance the purchase.
Expert:  Sam replied 1 year ago.

Hi

Thanks for your response

Then make the purchase of the business and most of the land the property as separate transactions.

You do NOT want to make the property as part of the business for the following reasons

1) As the property will be you and your familys' home, then making it part of the businesses, will incur a benefit on you liable to tax as only your employees might be considered as allowed to have a tax free property supplied (if there was an absolute reason to be on site 24 hours a day 7 days a week) But as owner of the business or director of the company this would not apply https://www.gov.uk/government/publications/living-accommodation-hs202-self-assessment-helpsheet

2) When you come to sell you would not have annual exemption of the sale (currently first £11,000) nor private residence relief (which recognises this has been your main home throughout ownership) this means Capital gains tax (But through corporation tax) would apply)

3) Stamp duty would apply either way IF the purchase of the residential part was in excess of the stamp duty limits and similarly for the non residential part. Or if made as one transaction (a mixed purchase)

Calculator for you to establish the charge as one transaction and as two

https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

So my advsie is keep the purchases as two - residential and then the business element

Let me know if I can assist further but it would be appreciated if you could rate me for the level of service I have provided (or click accept)

Thanks

Sam

Customer: replied 1 year ago.
Thanks.Points 2 and 3 are as I expected, ie, that if purchased by the company there would be CGT liability, and that stamp duty would apply to the whole amount purchased irrespective of the structure.I'm not so clear of the relevance of point 1 however since "managers of camping and caravan sites living on, or near to, the premises" is on the list of occupations which provide living accommodation in the guidance (the link you provided) and is therefore exempt. Are you saying that being owners/directors of the business would exclude us from being the site managers and therefore this exemption would not apply?
Expert:  Sam replied 1 year ago.

Hi

Thanks for your question

Point one was to advsie that as owner/director you could NOT be considered as relief arising on any benefit of using the house SHOULD you made just the one transaction ( I was anticipating the question arising- apologies if this only served to confuse matters)

But yes I am saying that being owners/directors of the business would exclude you AS the site managers from being eligible for this exemption

You can be site managers/owners but you are not due the Leif as an employee would be - so would be charged as a benefit on additional to your tax position.

Do let me know if I can assist further

Thanks

Sam

Customer: replied 1 year ago.
That's very interesting, do you know how the tax on that benefit would be calculated?
Would the same be true if we were a sole trader rather than a ltd co? The current owners operate as a sole trader and (as far as I know because I asked them about the costs for running the house) do not pay any additional tax relating to living in the house on site on the basis that they need to be on site as site managers. Their 'company' pays for the household utilities etc.
Expert:  Sam replied 1 year ago.

Hi

Thanks for your response - I have already provided you with this link - here it is again

https://www.gov.uk/government/publications/living-accommodation-hs202-self-assessment-helpsheet

If you were a sole trader then this would all be owned by you as an individual so the same issues would not apply.

And the advsie you are given may be so that the "company" pays for the household expenses but this again is a benefit in kind - and is liable to tax and National Insurance ( anfd the company pays Class 1A National Insurance too)

Thanks

Sam

Sam and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Many thanks.