Readers’ forum: Artificial arrangement

17 December 2019

Issue: 4725 / Categories: Forum & Feedback

Transfer of a property to aid VAT recovery.

PropCo has acquired a commercial property for about £1.2m which it intends to convert into four residential units. These units will then be let to the public and because the output is VAT exempt it is understood that VAT charged on the conversion costs (at 5%) cannot be recovered (the company has no other activities).

It has been proposed that a subsidiary NewCo is set up. This will be owned wholly by PropCo to which a first grant of a major interest of the property will be made upon completion of the works. The units will then be let to the public by NewCo.

The aim is to ensure that the transaction qualifies for group relief for both stamp duty land tax and chargeable gains so that no corporation tax or stamp duty land tax liability arises on the transfer and...

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