Sell SPV or just the Freehold Property in it?

by Readers Question

8:34 AM, 18th February 2016
About 3 years ago

Sell SPV or just the Freehold Property in it?

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Sell SPV or just the Freehold Property in it?

Can anyone put me straight as to which is most tax efficient. To either sell my SPV or sell its one property?which

The SPV (Special Purpose Vehicle) Limited company has one freehold property(150K), one bank loan(100K) and one sole directors loan(me with 90K!) for 280k.
A) As the property is still owned by the SPV I believe there is no Land registry change and hence no Stamp Duty and no nasty extra 3% – Am I dreaming?.
B) The 80k profit from the sale of the SPV will be fully taxable in the same tax year.
C) Is it also right that I will pay 0.5% Capital gains tax – but can anyone tell me if its on the 80k profit or the 280k that it sellls for as i started it with £100 of shares?
D) What tax saving has the buyer gained?

Or Option 2 …
E) Sell the property on its own (I still expect to get, close to, 280k)
F) Buyer pays all Stamp duty
G) All profit goes into the SPV and pays me out over multiple tax years?

Can anyone see a reason why I should not be selling the whole SPV?

Can anyone see why its better to sell it as the freehold property?

Thanks

Allan



Comments

Neal Craven

13:12 PM, 18th February 2016
About 3 years ago

From a practical point of view I suspect it would be much harder to sell and involve much more DD if you were to try to sell the SPV

Neil Patterson

15:46 PM, 18th February 2016
About 3 years ago

I have not come across selling with the SPV before either.

Do you have an accountant? If not please see our tax page >> http://www.property118.com/tax/

Dixie Dean

20:44 PM, 18th February 2016
About 3 years ago

A client of mine who owns retail parks sold one sat in a company, selling it as a corporate sale rather than a land transaction. As such didn't pay CGT (£13m saving). HMRC took exception and a 7 year paper battle proceeded. 7 years later he was proven to have acted legally and kept his £13m. Every case will be different for sure but I don't see why you can sell as company. Company's buy company's all the time. As for what option will be the most tax efficient, you'll need to take appropriate advice. It would be useful to know the outcome of the advice of younger some for future planning!! Good luck.

Neal Craven

9:59 AM, 19th February 2016
About 3 years ago

I can see on a multi million pound transaction but not on this lot size

Peter Alcock

10:52 AM, 20th February 2016
About 3 years ago

Allan
I am a chartered accountant so feel qualified to answer....provided you can show buyer there are no skeletons in SPV corporate cupboard then selling shares in SPV may be the better option (subject to tax - see below) to you as it avoids property conveyancing issues and associated costs including SDLT (3%).You are merely changing ownership of shares (property continues to be owned by company). You gain on shares is essentially taxable to capital gains (less usual reliefs) in tax year of disposal and is value of shares (property value less borrowings I assume) less £100 cost of shares. Any capital losses b/f can of course be offset against this gain. Gains rate will be 28% at higher rates.

If you were to sell proprty as opposed to shares then coprporation tax payable on gain at 20% . Wihdrawing gain by way of dividend either at once or over period of time will have personal tax implications depending on other income. Can only advise with more detailed info.

The 0.5% tax alluded to is in respect of share transfer stamp duty (not capital gains) and usually paid by the buyer. This is cheaper than property purchase costs for the purchaser.

NB directors loan can be drawn from business tax free as part of deal to purchase your shares.

As you can see, as many things invilvubg tax its not a simple answer and depends on individual circumstances. Happy to advise further perhaps privately once I fully understand your position and indeed the attitude of the purchaser !

Hope this helps

Peter

Allan Wadsworth

13:04 PM, 22nd February 2016
About 3 years ago

Many thanks for your thoughts so far.
Yes i have put this to my accountant, but only gave him 2 minutes to think first! Massive thanks to Peter Alcock for your comments ever so helpful.

I think the SDLT saving is more than 3% as selling the property on its own would create a tax laibility of £4000 and then the new nasty 3% being an additional £8,400 making £12,400 tax. On selling it as an SPV for £280,000 the 0.5% tax is just £1,400 so thats a saving of £11,000 for the buyer. - I must be wrong, surely? If thats right why are we not all doing this?
From my tax stance as i am a 20% tax payer at present this sale of the business would give me a pretty hefty £80,000 lump of income. Maybe its a capital gain so 11,000 relief - O can i make my wife a director and get double capital gain?
I guess my other challenge then is to find the right buyer who can see this and isnt frightened off by the SPV.
I've put it up for sale via Hughs Ellards and will be explaining all this to him, via my accountant!!! - Cheers


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