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Company sale
What is the best way of winding up company?
Our client is a wholesale food company incorporated in 2015. It sold its customer list for £450,000 together with stock (£14,000) and fixed assets (£14,000) in May. Its activity has almost stopped since May except for final proceeds received in September.
The year-end December 2020 showed a reserve of £150,000 and no goodwill on the balance sheet. It is owned by a family of five shareholders with 20% of shares each, three of whom are directors. The parents own a warehouse jointly that the business used rent free and which they plan to sell in July 2022 to the same purchaser for an estimated gain of £230,000. The parents have annual rental income from residential properties of £13,000 each and no other income except small salary £8,000 and £4,000 dividend in 2021/22 and only rent income from 2022/23.
I have the following questions:
- Can the final year end be extended to December 2021 to declare any dividend, salary or pension?
- How to extract the reserve before winding up? Maximum pension extract is limited due to relevant earning for pension.
- With estimated reserves in the final account over £600,000, would formal winding up with business asset disposal relief be a better option?
- If so, can it be wound up over several years as long as it takes place within three years of cease of trade?
- When is cessation of trade? May or September or December 2021?
- Can the sale of the warehouse be made over two tax years to exploit CGT annual exemption and business asset disposal relief?
Readers’ input will be very much appreciated.
Query 19,843 – Juggler.
Property developer
Limited liability partnership investing in UK property.
My client intends to acquire land to develop residential property in the UK with a view to selling it for a profit.
A requirement of the lending bank is that the vehicle to undertake the trade is a UK company limited by shares. The UK company will have two shareholders: a third party and my client’s non-UK resident investors, via an LLP.
I understand that the UK company will be subject to UK corporation tax, but I am not sure about the tax implications of the LLP as a result of its shareholding in the UK company.
I understand that the directors of the UK company will declare dividends to shareholders, who will realise their investment. Because the LLP is tax transparent, the distribution may be treated as disregarded savings and investment income under Income Tax Act 2007, s 813, with the dividend assessed on each LLP member in their relevant jurisdiction.
However, I am uncertain whether an LLP which holds shares in a trading company would be deemed to be ‘carrying on a trade, profession or business with a view to profit’ and whether the tax transparency of the LLP would be maintained. An appreciation of the LLP’s tax and tax filing obligations in the UK would also be appreciated from readers.
Query 19,844 – LLPlease.
Property access
Will a lane be eligible for only or main residence relief?
My client’s house is surrounded by farmland. Access is along a lane about a quarter of a mile long with another property owned by a third-party about halfway between my client’s house and the main public road.
My client has a right of way along this track, but it is not used by the farmer and my client has agreed in principle to buy it from him. A right of way may be granted to the other property owner or they may construct their own access to the main road.
Can readers let me know whether the cost of buying the lane will be part of the only or main residence exemption on any future sale of the house or is this a separate asset?
Query 19,845 – Willow.
EU VAT confusion
VAT challenges with buying holiday let properties in EU.
I have a local client who has inherited some money and wants to buy a residential property in three European cities and rent them out through Airbnb to short-stay visitors. The cities are Lisbon, Madrid and Paris and am concerned about the current VAT implications.
These countries all have low registration thresholds so I suspect my client will need to register separately in each country. But then a colleague said that, since 1 July 2021, he will only need to register in one of these three countries under the MOSS scheme – mini-one-stop-Shop. But if that is the case, how will he claim VAT on his expenses in each country – for example, the solicitor bills when he buys each property? And how will the VAT on, say, his Spanish property be paid to the Spanish tax authorities if he registers for MOSS in Portugal?
It all sounds very confusing, so readers’ help would be appreciated.
Query 19,846 – Confused.
