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I am selling a small business investment that I was gifted about 18 months ago. The market value at that time was 500,000 and I am now selling it for 650,000. What would be the cost price? Would it be 0 because I did not pay anything for it (as it was gifted) or would it be 500,000 (the market price at the time).
Many thanks. Very helpful indeed.
Thank you for your support.
One point I should have mentioned is that the gift creates a Potentially Exempt Transfer (PET) in the donor's estate. PETs run off at a taper over seven years and in the event of the donor's decease within that period are added back to his estate for Inheritance Tax purposes. PETs are the first to suffer tax and if the estate is insufficient to meet the tax on the PET then it cascades down to the beneficiary for immediate settlement. The classic defence against the PET is a reducing term life insurance.
Would you be able to help with 1 more follow up question related to this subject ?
Thanks for helping further.
I am transferring my personal investment asset freehold to my company (100% shareholder and only director). The asset is currently leased out and receiving a monthly rent. Once the asset has been transferred, the company will receive the rent and will repay me monthly the "full 100% loan" in 2 stages. Stage 1 is where no interest is paid - for about 5 or 6 years and then Stage 2 where interest outstanding will be paid.
My question is - If for example the rent was £1,000 pm, how would this be split in terms of Corporation Tax, Loan repayment, expenses, for both the stages ?
I also understand that interest will be taxed by the company under CT61 and the rest paid to the director but would that also be due for Corporation Tax/Expenses ?
Thanks a lot
Thanks for this. So to clarify; CT61 is one way of doing this. Is there another? (or is this beyond the scope of this issue?)
So, for my example, the £1,000pm is the rent. In Stage 1,If the Co. pays back the director the full £1,000pm loan principal amount, then no Corporation Tax is due as the full rent is paid back and its classed as an expense.
In Stage 2, the rent £1,000 has to have 20% paid to HMRC with CT61 and the balance of £800 paid to the director. Again no Corporation Tax is due as the £800 is an expense ?
Is my understanding of both stages correct ?
Yes CGT will be paid and has been calculated (Sob - big amount)
Really sorry to labour on with this point but I am still unclear.
Your 2nd para seems to contradict itself? Repayments of principal is outside CT, yet you then say repayment of loan would be assessed for CT.
Are you saying that repayment of principle is different from repayment of loan ? If so what would be the difference. I am selling (transferring) my asset to the company. The company will pay me for the asset over a number of years and then once the market value is paid back, the interest will start to be paid. I just want to know how should the company deal with the rent received in respect to paying me back.
Sorry about thisCustomer but you are my expert !
Really sorry about this but I am even more confused lol i am being thick
Can we focus on the example?
Example, the rent is £1,000pm.
In Stage 1, the Co. pays back the director no interest and wants to maximise the repayment. So, out of the £1000, is there a CT? if so can the rest be paid to director and is tax free? Or there is no CT and the full 1000 can be paid to director?
In Stage 2, interest has to be paid so how is the rent £1,000 split between CT, expenses, paid to director
We'll get there or shall we talk on the phone?
phew finally understand lol
Thanks for your patience i will rate it add abonus tmrw
Delighted to have been of assistance.