Take a company that is currently renting its business premises paying €35,000 and the property comes up for sale. The price is €500,000.
So the company has €100,000 to use as a deposit and borrows €400,000 at 5%. So let look at the figures over 20 years.
|
So the company will save the rent €35,000 x 20 |+700,000
Deposit|-100,000
It will payback the loan + interest,|-€633,600
Extra CT due to reduction in rent | -€ 53,300
|-€86,900
If the company were to sell the property in 20 years for |+€750,000
CGT €750,000 - €500,000 = 250,000 x 13/20 = 65000 x 33% |-€53,625
Cash in company|€604,475
If the company is liquidated CGT payable 33%|€199,477
Net proceeds to shareholder|€404,998
This assumes no retirement relief on the date of disposal
So the company has €100,000 to use as a deposit and borrows €400,000 at 5%. So let look at the figures over 20 years.
So the company will save the rent €35,000 x 20 |+700,000
Deposit|-100,000
It will payback the loan + interest,|-€633,600
Extra CT due to reduction in rent | -€ 53,300
|-€86,900
If the company were to sell the property in 20 years for |+€750,000
CGT €750,000 - €500,000 = 250,000 x 13/20 = 65000 x 33% |-€53,625
Cash in company|€604,475
If the company is liquidated CGT payable 33%|€199,477
Net proceeds to shareholder|€404,998
This assumes no retirement relief on the date of disposal