Should I sell or risk tenants buying at undervalue price?9:08 AM, 25th September 2019
About 4 weeks ago 48
Two scenarios regularly pitched to me during tax planning consultations are:-
1) We want to sell some of our properties which are low yielding and replace them with higher yielding properties.
2) We have been considering selling some of our properties and using the net sale proceeds to pay down other mortgages to improve the overall gearing in our business
You can probably guess the question that follows these statements!
You’ve got it ….
“Is there a way to do this without having to pay Capital Gains Tax on the uplift in the value of the properties since we first purchased them?”
There is no rollover relief for residential properties as such, but if your rental property portfolio is run as a business you might just be in luck.
A little known piece of legislation known as TCGA92/S162 enables you to sell your ‘whole business’ to your own company at market value in exchange for shares. Effectively, you exchange your equity for shares and offset what would otherwise be the taxable capital gain against the value of those shares. This does not cancel out the gain forever, but it does transfer the capital gain out of the properties into the shares.
If your company were to subsequently sell one or more properties it would then only pay corporation tax (currently 19%) on any capital appreciation from the day of the business sale. If the property had not increased in value there would be no tax to pay.
The outcome is that significantly more net sale proceeds would then be available for reinvestment or to pay down other loans.
For more details and a personalised report and recommendations please book a tax consultation using the form below.Show Form To Book A Tax Planning Consultation
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