Hi Rachel, and welcome back.
I have a taxing question for you (excuse the pun), if you would be kind enough to review and offer an opinion.
We sold a property in Jan07 for Ł396K, and don't know how to treat the capital gain. We owned this property since 1993, (price was Ł189K) but its beneficial owner was an offshore company owned by ourselves whilst resident abroad.
In 1999, we became UK resident for tax purposes.
In 2003, we transfered ownership from our offshore company to our personal names, at an arms length sale price of Ł225K (solicitor advised its market value), and have accounted for its rental income since then in our UK Ltd Co. Up to that date, the offshore company had paid annual UK income tax on this property, and in its year of liquidation (2003) it had paid capital gains tax for its period of ownership (nil after pre-1998 indexation relief). Note here that although the offshore company was capital gains tax exempt, we were UK resident, so recorded the gain calculation for the record.
The
IR ran an investigation on our affairs in 2005, noted that they didn't like the 2003 transfer value, stating their estimate was Ł250K, did not apply any additional taxes, but stated they reserved the right to question the transfer pricing when we finally sold it. They accepted that the property is held in trust by us as individuals, on behalf of our Ltd Co. They accepted income/expenditure associated with the property to be reported in the company accounts, not as a private investment.
Questions:
At what rate is the capital gain calculated in the small Ltd Co?
Six months prior to selling, we remortgaged it and bought further properties. Can we apply rollover relief to the capital gain, given that all funds received were effectively reinvested?
We will, of course, be asking our accountant the same questions in a couple of months, but think we would benefit from independent opinion. Just in case, we have kept a cash pile to pay the inevitable gains tax next January, but thought it wise to investigate potential mitigation.
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