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bigduckontax, Accountant
Category: Tax
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I just received payout from an equity share in the company

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I just received payout from an equity share in the company that employees me. Obviously this payout (£300k) is subject to CGT etc, which will be covered in my tax return for this year.With the remaining funds I intend to purchase a holiday let. Can I put this holiday let into my wife’s name to minimise income tax on future earnings, or is there a better way to make a holiday let more tax efficient?Thanks rich

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

How did you receive the equity share in the first place?

Customer: replied 3 months ago.
Hi. The company is Private Equity backed, so my position carried option to purchase equity share. I bought some notional shares 5years ago. We recently changed PE ownership so that released the equity payment (subject to CGT).
Thanks rich

Thank you for that Rich. I see that you have grasped the CGT position. You will have a non cumulative Annual Exempt Amount (AEA), currently 11.3K. to offset this gain.

Putting the holiday lets in your wife's name would constitute a gift, but inter spousal gifts are outside the scope of UK taxation. Once under her control then net rentals would be taxed as her income not yours. You could transfer the properties to a limited company. The profits would the suffer corporation tax at 19%, but any distributions made would have to be done through the medium of PAYE so there is not much advantage there unless you are a higher rate tax payer. You would be entitled to Incorporation Relief from CGT, but that only postpones the tax until the ultimate sale of the company.

I do hope that you have found my reply of assistance.

Customer: replied 3 months ago.
it’s a very helpful start thank you. Just for clarity;
1. What does outside the scope of UK taxation, mean? Does it mean there is are no restrictions to the inter spouse gift?
2. Setting up a limited company sounds a possibility, are there any restrictions to how I invest into this company once it’s established (ie. can I transfer Property into the ltd company or do I need to transfer money so the ltd company purchases the holiday let)?
Thanks rich

1. Correct, Rich.

2. You could finance the transfer simply by moving the property across and then you would have made a loan to the company to the value of the transfer. You could have the loan repaid in full or in part at any time without incurring any tax liability unless interest were paid on the loan. There will be Stamp Duty Land Tax (SDLT) payable on Incorporation based on current market value.

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