Can people with tax/accounting/property expertise please comment on the viability and advisability of the following scenario ?
Mr & Mrs A own a small business which is a Ltd Co. They are close to retirement age. Throughout their business life they have largely used the business' profits to acquire houses that they then let out. Now they are retiring they want to separate the business operations from the properties aquired.
The houses (numbering 12) are valued by an MIAVI and they all tot up to around €3 million. The business (including the property of its premises) is estimated at around €1 million.
The proposed transfer of the purchased houses from the business into the private ownership of Mr & Mrs A is to be done via reducing the creditor column of the business' Capital A/C by around €4.5 million - the value of the properties plus associated transfer charges and duties. The CGT on this transaction is to then be paid through a separate increase to the business' Capital A/C by Mr & Mrs A.
Due to the scale of things, it will clearly be necessary for Mr & Mrs A to immediately sell some of the houses in order to meet the substantial CGT demand on their business' property transaction. This in turn means that they as individuals will come to be liable to CGT on the latter properties' sale. However, as the properties were transferred at or near a market valuation close to their sale price, this should be minimal.
In short, Mr & Mrs A have used their Ltd Co business' structure (and associated lower corporation tax rates) to acquire a good number of houses and have effectively paid CGT once (as they should) when taking these properties back into their personal possession on retirement.
Mr & Mrs A own a small business which is a Ltd Co. They are close to retirement age. Throughout their business life they have largely used the business' profits to acquire houses that they then let out. Now they are retiring they want to separate the business operations from the properties aquired.
The houses (numbering 12) are valued by an MIAVI and they all tot up to around €3 million. The business (including the property of its premises) is estimated at around €1 million.
The proposed transfer of the purchased houses from the business into the private ownership of Mr & Mrs A is to be done via reducing the creditor column of the business' Capital A/C by around €4.5 million - the value of the properties plus associated transfer charges and duties. The CGT on this transaction is to then be paid through a separate increase to the business' Capital A/C by Mr & Mrs A.
Due to the scale of things, it will clearly be necessary for Mr & Mrs A to immediately sell some of the houses in order to meet the substantial CGT demand on their business' property transaction. This in turn means that they as individuals will come to be liable to CGT on the latter properties' sale. However, as the properties were transferred at or near a market valuation close to their sale price, this should be minimal.
In short, Mr & Mrs A have used their Ltd Co business' structure (and associated lower corporation tax rates) to acquire a good number of houses and have effectively paid CGT once (as they should) when taking these properties back into their personal possession on retirement.
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