Putting site into company - tax issue?

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LLB123

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Tax experts: I have a site that I'm about to build a house on in partnership with another party who will finance. I personally own the site and we're planning to set up a company for the purpose/duration of the build.
Given that I personally own the site wondering if it might trigger a personal capital gain on market value of the site by putting into the company and making it a company asset. No money will exchange hands so would it be viewed as simply director's capital of sorts? Cheers.
 
I am not a tax expert and for a complex property development project involving a company, you need to pay for tax advice.

Yes, if the company buys the site from you, you will be disposing of it, so it would be subject to CGT.

What is the advantage of building a single house via a limited company?
 
Brendan Burgess said:
I am not a tax expert and for a complex property development project involving a company, you need to pay for tax advice.

Yes, if the company buys the site from you, you will be disposing of it, so it would be subject to CGT.

What is the advantage of building a single house via a limited company?
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Thanks Brendan. It's because the other party is financing the build cost and the site itself will be my contribution. I'd hoped since no money would be changing hands it would not trigger a CGT situation until I look to take profit out of the company down the line.
 
LLB123 said:
Thanks Brendan. It's because the other party is financing the build cost and the site itself will be my contribution. I'd hoped since no money would be changing hands it would not trigger a CGT situation until I look to take profit out of the company down the line.
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And how do you intend to do that tax efficiently?

Without knowing the details, this seems like a fairly straightforward partnership i.e. not a company
LLB agrees to contribute a site which has a deemed value of €200k
Johnny agrees to pay for the construction which costs €400k.
The house will be sold and the proceeds distributed LLB €200k + 50% profit.

That will be complicated enough to figure out from a tax point of view, without inserting a limited company into the middle of it all.
 
T McGibney said:
You need legal advice too. Frankly the idea of conveying the site to a new company in advance of the build, thus incurring a stamp duty cost in addition to CGT, sounds crazy.
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I hear you. Another element I hadn't considered, thank you. Back to the drawing board so! :)
 
Agree with the above. A company doesn't sound like a good idea in this case
 
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T McGibney said:
You need legal advice too. Frankly the idea of conveying the site to a new company in advance of the build, thus incurring a stamp duty cost in addition to CGT, sounds crazy.
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Is it the act of conveyancing to a company that triggers a tax event? In which case a partnership might work best but not if same applies.
The plan would be to sell the completed property and split the profits proportional to our initial input and outlined in a legal agreement. No point in doing this if I've to take a tax hit on the way in and out!
 
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Brendan Burgess said:
And how do you intend to do that tax efficiently?

Without knowing the details, this seems like a fairly straightforward partnership i.e. not a company
LLB agrees to contribute a site which has a deemed value of €200k
Johnny agrees to pay for the construction which costs €400k.
The house will be sold and the proceeds distributed LLB €200k + 50% profit.

That will be complicated enough to figure out from a tax point of view, without inserting a limited company into the middle of it all.
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Yes the partnership seems to be the better idea, but I'm trying to figure out if my contributing the site triggers a personal tax event for me before we start.
 
Brendan Burgess said:
Yes, it does.

You are disposing of a site and would pay CGT on any gains.

Brendan
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I understand the CGT on gains once the completed property including site is sold, but how does my contributing the site from the outset to the partnership as part of a development venture be considered a disposal or gain, when no money will have changed hands at that point?
 
Money does not have to change hands for a disposal - for example, if you give your kids a gift of a house, it is a disposal at market value.

You are transferring a site into a separate legal entity, so you are disposing of it. Therefore it will be subject to CGT.

I am not a tax expert, but if I am wrong I will be corrected.

Brendan
 
Brendan Burgess said:
Money does not have to change hands for a disposal - for example, if you give your kids a gift of a house, it is a disposal at market value.

You are transferring a site into a separate legal entity, so you are disposing of it. Therefore it will be subject to CGT.

I am not a tax expert, but if I am wrong I will be corrected.

Brendan
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You are not wrong Brendan.

We've already told @LLB123 that they need tax & legal advice here. There should be a way to structure this venture that doesn't involve the transfer of the site from them into a developer entity, but this is a question way beyond the scope of a forum like this.
 
T McGibney said:
You are not wrong Brendan.

We've already told @LLB123 that they need tax & legal advice here. There should be a way to structure this venture that doesn't involve the transfer of the site from them into a developer entity, but this is a question way beyond the scope of a forum like this.
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Brendan Burgess said:
Money does not have to change hands for a disposal - for example, if you give your kids a gift of a house, it is a disposal at market value.

You are transferring a site into a separate legal entity, so you are disposing of it. Therefore it will be subject to CGT.

I am not a tax expert, but if I am wrong I will be corrected.

Brendan
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Thanks both, am in the process of getting further advice but in the meantime trying to get my head around various options and pitfalls so we can figure out the best way forward.
 
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