Offer of share in Company property

C

ConorP

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Hello People,

This is my first post.. In short here is my situation.. I have just been made a company director in the company I work and have 1/3 of a share holding but not 1/3 in the business premises that's in my bosses name...

Now as a perk / loyalty bonus.. My boss wants me to have 1/3 of the business property , but at a price.

The premises is valued at conservatively 360K.. All he wants is 20K from me and I can have 1/3 of the property....

Now there's 10 years of a mortgage left on the premises but that doesn't really concern me cos the outstanding balance is not very much....

I will not have to make any mortgage payments only this once off one and just draw up a legal document to say that I own a portion of the property which he says he most gladly will sign.

This is quite new water for me.. Does anyone have any info on the legal / tax implications of doing this..

Is it hard to draw up a legal document to say that he is handing over the portion of the property to me ?

Any advice would be greatly appreciated.

Conor P
 
As an Auctionneer...my professional opinion would be to buy the share in the property. Make sure the deeds are changed to include your name. What is out standing on the propert and how succesful is the company? You can pm me if you like.

Kind Regards

Steven Blanc
 
Your boss who you have a defacto business relationship with offers you property worth 120k (minus proportion of outstanding mortgage) for 20 k
and the mortgage proportionally gets paid for nothing.

I think you may get hit for tax as you're buying below market value and your employer also paying your third of the mortgage into the future is also making a regular gift/capital gain to you.

Whats the difference between this and any benefit in kind, company car, company property etc ?

If I was you I'd get professional advice.
 
Yes .. I had a feeling I would get hit for property tax.. Or I mean CGT ...

Am I right , from what I read on the revenue site that the CGT would be .. Value of my share , less what I paid for it .. less 90% tax free . Then 10% CGT on the remaining balance..

IE> 120 less 20 ( I pay ) = 100K less 90% tax free = balance of 10K

10% CGT = 1,000

I'd live with that .. But I will be seeking advice in the next few days .. I just wanted to bounce the idea off a few people in here to get a few different takes on it . It's not the type of topic I'd raise with many people I'd know.. Let's face it , most people don't like to see there peers get on in life ...

Thanks

CP
 
HI ConorP

Are you posting from Ireland or the UK? The 10% CGT rate doesn't apply in Ireland unless there is some retirement relief or business transfer relief about which I am not aware.

And where is the 90% reduction coming from? Retirement relief?

You are getting 120k worth of assets for 20k, which seems very generous, so you should accept it as long as you are sure that there is no catch. Maybe your boss is happy to give you 100k to keep you in the business?

You definitely need tax advice on both the property and share transfer. It could be interpreted as a payment in lieu of salary and thus your €100k would be treated as income and taxed at 41% income tax rates. I am not saying that this is the case, I am saying that it might be the case.

Pay for professional tax advice.

Brendan
 
I think that you can get almost 25K tax free plus your annual exemption of €1,270.
After that you pay 20%.
 
Say the share of the property I'm being offered is worth 120K

Then 25K is allowed on the first portion of the gift ( from the revenue :) )

The say I pay the owner 20K for my share..

That leaves a balane of 75K on with 20% must be paid..

Now what I really want to know is , can I qualify for the 90% business releif tax as outlined in the revenue website .. in the CGT section..

that would be ideal and save me the bones of 15K.. Also will I have to pay stamp duty ???

This 20K offer for the 1/3 of the property seems to be getting pretty expensive.

Any input people ??

CP
 
Is there a confusion here with CAT ( Gift Tax) and CGT ( Capital Gains Tax)?

In simple terms, you can take a gift from a non relative of up to c.25K before paying any CAT. You pay 20K then for a gift worth 120K.

You pay stamp duty on the market value of the share of the property and you may also pay 20% CAT on 75K gift. Still looks like a pretty good gift to me.

I don't think you get any business relief.

Go get professional tax advice - if you're confusing CGT with CAT, you need some basic explanations to get this sorted in your head. You should also be clear about your long term obligations as a director/shareholder in a company.

mf
 
Thanks very much MF.. That's a lot clearer now..

Yes , CAT .. You're dead right .. Called into my solicitor today and he suggested that I would be caught for the 20% Tax on the balance plus stamp duty..

I guess he was right.. Gonna go see the accountant next week and see what we can do..

I know it does still seem a good opportunity.. and not long half waiting for it either , I might add.

Thanks for that again MF.. Just wanted to get the head clear so I could bandy around some figures before we 'tweak' them , with a bit of luck.

Regards

CP
 
One quick question on the valuation.. Who does it ?? Do revenue nominate someone .. Or can I get my own valuer to do it ???
Any idea's on this part of the equation people.

Thanks CP
 
You would be able to submit your own valuation but it would have to appear reasonable to Revenue.
 
Well , even a tiny change in the valution will make a big difference on CAT @ 20% i'll have to pay

20% of 100K = 20K

20% of 75K = 15K

Both of these as remainders of balance after the 20K paid to the boss and the 25K allowed by the revenue....

It all adds up , I think I'm right ya ????

Please correct me if I'm wrong...

And with this slow down in the economy / property market .. maybe now is an excellent time for a restrained valuation.

What do you think ?
 
There may be a slow down but the valuation still has to be reasonable. Most decent valuers know enough to know that Revenue are perfectly capable of pulling a dodgy valuation, holding up a transaction for months, and querying all parties about the rationale for a low valuation.

mf
 
ConorP: And with this slow down in the economy

Which slowdown is this? Ireland economic growth to May 2007 5.5% (OECD) Rest of EU 2.5%.

Anyway, I would suggest you seek the advice of a tax consultant AITI, as well as your solicitor.

Solicitor will not be a qualified expert in tax law. That accolade goes to AITIs.

When 'tweak'ing the figures as you put it, remember we all must pay our fair share of tax.

After the tax liability in this deal is sorted, you will still be in profit.
 
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