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Readers’ forum: Should owner surrender losses to the subsidiary

17 April 2023
Issue: 4884 / Categories: Forum & Feedback , Business
Property sale to subsidiary

My client Charlie acquired in a new limited company a commercial property for £1m and spent some £1.5m converting it into eight flats with the intention to let them to the public. However to maximise finance opportunities Charlie’s financial adviser suggested a sale of the property at market value be made to a wholly owned subsidiary of the company. The motive for the transaction is therefore purely commercial.

The company therefore has two options: (a) grant a 999-year lease to the subsidiary company which will then let the flats on AST tenancies and will pay nominal ground rent (£200 a year) to the holding company; or (b) sell the freehold to the subsidiary in which case the holding company remains with no assets generating income.

In the course of conversion the holding company incurred expenses of £120 000 (mainly legal...

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