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Dentist surgery
Capital gains on transfer of property to new company.
I have a dentist client operating as a limited company.
The surgery where the practice is located is owned by the directors personally. They charge the company a market rent.
They now wish to transfer the freehold to a new limited company (owned by the same directors).
My question is whether the resultant capital gain can be held over, or will it be immediately chargeable?
Query 20,023 – Dentist.
Stamp duty land tax
Is stamp duty payable on the transfer of company property?
My client has holding company, Company A, which is a trading company with an approximate value of £2m. It has a 100% trading subsidiary (Company B with an approximate value of £1m).
Shares in the holding company are 100% owned by one shareholder Mrs Z who is UK resident and domiciled.
We did a direct statutory demerger under CTA 2010, s 1076 and as a result the above two companies are now stand alone trading companies, ie instead of Mrs Z owing shares in just the holding company (Company A), she now owns 100% of the shares directly in the holding company (trading co) and also 100% shares directly in Company B (trading co).
No money has changed hands to Mrs Z. This transaction is for bona fide commercial purposes, due to regulatory reasons. We did obtain HMRC clearance and there are no intentions of selling either of the companies (ie Company A or Company B) in future for stamp duty purposes.
I told the stamp duty office that the transaction is not a ‘conveyance’ and as a result the transaction is not chargeable for stamp duty. The transaction is exempt and therefore no relief is necessary and as a result the stock transfer form simply does not require stamping.
The stamp duty office said: ‘At present the relief on this demerger does not qualify and stamp duty is payable on the value of the consideration shares per Stamp Act 1891, s 55. No relief is due under FA 1986, s 75 as all the parties needs to be corporate. Please see our website re: reliefs and exemptions which you might find useful. Stamp duty reliefs and exemptions on share transfers.’
Readers’ thoughts would be very much appreciated.
Query 20,024 – Stamp duty.
Gift aid
Giving money to charity above annual income.
A client has established a private charitable trust with which he intends to support good causes. He wants to give it more money upfront than he has taxable income this year.
I recall from years ago the idea of a ‘deposited covenant’ – does that still work for gift aid? If his income is £100,000 a year, and he endows the charity with £300,000, in round terms he will make an initial gift of £100,000 together with an interest-free loan of £200,000, then write the loan off as gift aid donations over the next two years. I believe that is acceptable, but would like reassurance.
I also am concerned that the purpose of the gift is to buy a holiday cottage. He says that this is an investment property and the rent will all be used for charitable purposes. Further, if his family uses it they will pay the same rent as everyone else so it is ‘all above board’. But I do not believe that ‘running a holiday cottage’ is something that a charity can legally do just to generate income – it would be different if the charity was involved in providing holidays for needy people, but that does not seem to be the idea. Do readers agree?
Query 20,025 – Sceptic.
VAT and loyalty reward
Reducing output tax on member reward credits.
One of my clients offers flexible workspace accommodation to local businesses on a subscription basis. The members get access to a table and desk on a 24/7 basis, wifi connection, tea and coffee, even free biscuits. The subscription fees are standard rated.
In order to encourage new members, my client wants to reward existing members who refer new clients. If a new client subscribes for a year, the referrers will be given a ‘cash payment’ equal to 10% of the annual fee paid by the new member.
My client is keen to make an actual payment to the refers – more transparent – rather than discount their next subscription but I think this might be an own goal as far as VAT is concerned.
My view is that the referrers are then making a marketing supply, which would be a standard supply by them, but not all of them are VAT registered.
Would a discount option not be better – a contingent discount arrangement is the correct term, I think? My client would then only pay output tax on the discounted amount charged to the existing members.
I look forward to finding out what readers think about this.
Query 20,026 – Freelance Freda.
