Tap into the tax smarts of this community – Development deal?

by Readers Question

10:48 AM, 28th January 2019
About 2 years ago

Tap into the tax smarts of this community – Development deal?

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Tap into the tax smarts of this community – Development deal?

Hoping to tap into the tax smarts of this community. I am working on a development deal at the moment where the landowner would like one of the completed units at the end. In general terms, what is likely to be the best way to structure something like that from a tax perspective (from their and our perspective)?

If we agree to give one unit to the landowner as part of the site acquisition deal we would want to pay less for the site given the value of that unit they are getting (and lost sales revenue for us). Would we just pay SDLT on the site acquisition value, or would HMRC expect consideration too for the value of the unit the landowner will be getting, even though it is not even through planning let alone built?

Would the landowner have to pay SDLT once that unit is complete and transferred to their ownership? How would that be calculated if they have been given the unit at cost?

On the other hand, the owner could have a right to purchase a unit from us once the development is complete and just purchase it in normal fashion, but then they will have associated mortgage and transaction costs so in many cases it would seem more beneficial to the landowner (and us) to be given a unit as part of the deal.

Any thoughts on tax implications would be appreciated, along with ideas on how best to structure a deal like this from anyone who has done something similar.

Thanks in advance.

Guy



Comments

Neil Patterson

15:04 PM, 28th January 2019
About 2 years ago

You would need confirmation from your solicitor and accountant, but I am guessing you would pay the SDLT on the initial lower purchase price, but then HMRC would get the landowner for SDLT on the value of the flat you give them later.

Neil Patterson

15:06 PM, 28th January 2019
About 2 years ago

>> https://www.gov.uk/stamp-duty-land-tax/land-and-property-transfers

"Consideration" has been given

Land and property transfers

You may have to pay Stamp Duty Land Tax (SDLT) if the ownership of land or property is transferred to you in exchange for any payment or ‘consideration’.

Kim Finch

10:37 AM, 29th January 2019
About 2 years ago

Andrew Punter of Cornerstone maybe able to help you.
He was the speaker at a NLA meeting I went to. We have passed him properties where we we were unsure if he could reduce our SDLT and surprisingly he could. Have an idea of how you think you wish to buy the property, contact him before you have gone too far down the buying process , if he can save you SDLT he will charge you 25% of the savings, if no savings then there is no fee. Solicitors and accountants are often not specialists in SDLT so they often do not understand the best buying structures to minimise SDLT.

Guy

12:04 PM, 29th January 2019
About 2 years ago

Thanks Neil and Kim, that is helpful. We are still in negotiations on this one but can potentially see it arising on others too. From a bit of research, the valuation for SDLT purposes on the transferred unit would appear to be based on inquiry to the District Valuer.


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