Tax - How to get property out of a business and into you personal name on retirement?

Hi All,

I am posting on behalf of my parents who unfortunately missed the rise of the PC and the Internet.

My parents are both Directors of a limited Company which they set up 30 years ago to carry out the business of running a shop. On the advice of their accountants they purchased a retail premises in the name of the Company.

My parents are now 60 years of age. The shop itself has been greatly affected by the recession and they hope to retire shortly.

Their employement and sole source of income over the last 30 years has been the shop itself.

The sole business asset is the retail unit and we are looking to transfer this, as tax efficiently as possible, into my father's name.

We intend to get professional advice in relation to tax planning. We would, however, greatly appreciate any advice or ideas that anybody on here can offer as we will not be able to afford to instruct a tax advisor to weigh up various different options.

Thanking you in advance for any posts,

Halfpenny.

Re: Tax - How to get property out of a business and into you personal name on retirem

If the business is being sold, and your parents sell the shares in the Company, any Capital Gain on the shop will remain uncrystallised. Your parents probably qualify for CGT retirement relief on the portion of the proceeds which refers to chargeable business assets, though they need to check that they fulfil the qualifying criteria.

Since you ask about transferring the shop into your father's ownership, it sounds as though he wants to hold on to the shop.
If you transfer the shop into your father's name while the Company is still trading, the Company will incur a Capital Gains liability.

Re: Tax - How to get property out of a business and into you personal name on retirem

Perhaps the first thing they should do is ask the accountant who advised them to buy the property into the business?

Re: Tax - How to get property out of a business and into you personal name on retirem

Hi

This one screams business retirement relief but as said previously make sure you fulfill the criteria.

Also I would add not to fall into the trap of selling the trade alone. You must sell the company and the shares to qualify.

Companys dont retire, people do!!!

Its always a bad idea to have property in a company because of the double charge to CGT. Selling the property to your father woudl be a bad idea as he will loose a signiificant amount of the business relief and pay a shed load of taxes for no real reason. Sell the shares of the company with the property in it.

Best of luck

dbran

Re: Tax - How to get property out of a business and into you personal name on retirem

Thanks for this Gervan.

The business is in trouble and the property is the sole business asset. It is likely however that we will sell the shares in the Company as you have suggested.

The perspective purchaser is likely to require a reduction as we will be passing on our CGT problem to them but this still seems to be the best option.

We are then going to invest the proceeds of the sale with a view to producing an income for my parents retirement.

Thanks you for the info,

Regards,

Halfpenny.

Re: Tax - How to get property out of a business and into you personal name on retirem

Thanks Complainer,

The shop was originally owned by three brothers and this may have been the reason that the Company purchased the property originally.

Regards,

Halfpenny.

Re: Tax - How to get property out of a business and into you personal name on retirem

Thanks Dbran,

We intend to proceed as you have advised. As stated above the business is suffering but we will still sell the shares of the Company which owns the Property.

Thankfully my parents are both Directors and fulfil the Business Relief Criteria. Now the question is what to do with the proceeds to produce an income. I think that this is for another forum.

Thanks

Halfpenny.

Re: Tax - How to get property out of a business and into you personal name on retirem

If the business is in trouble, they should stop trading.

One of the problems for people buying property through a company, is that they are buying all the problems of that company e.g. unsettled claims from employees, undisclosed tax problems which might not appear until after an audit has been conducted.

If I was buying a property through a company, which I would not do by the way, I would want to see a good length of time since the company ceased to trade. I would want to see a tax-clearance cert from the Revenue.

I don't know how this affects retirement relief, but you need to take advice on it.

While the CGT is a huge problem, there is a compensating factor in that the sale of shares is subject to 1% stamp duty instead of the 6% applying to commercial property.

Brendan

Re: Tax - How to get property out of a business and into you personal name on retirem

Halfpenny said:

The shop was originally owned by three brothers and this may have been the reason that the Company purchased the property originally.
.

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Maybe I'm missing something, but I don't see how the fact that it was owned by 3 brothers led to the recommendation for the company to buy it. At a minimum, by going back to the original accountant, you will discourage him from giving bad advice to other clients in future.

Re: Tax - How to get property out of a business and into you personal name on retirem

Thanks Brendan,

The Company does not have any employees except my parents. When I stated that the Company is in trouble I was referring to the fact that financially the shop's takings have substantially decreased over the last number of years.

There are a number of creditors and I realise that these will have to be discharged before any share sale is attempted. The Company is quite small however and therefore due diligence should kept to a minimum.

I am sure that the purcahser will look for a reduction due to the fact that the property is owned by a business.

I take you above points on board and we will of course be taking advice. I will post the advice once we have spoken to the releveant professionals.

Thanks again

Halfpenny

Re: Tax - How to get property out of a business and into you personal name on retirem

Hi Complainer,

I presume that it was to ensure that the actions of the brothers, the Board of Directors, in relation to the Property could be governed by a Shareholders' Agreement. This is a major guess on my part.

I am not even sure if the accountant is alive.

I agree however that it was poor advice and that it is now causing a major headache.

Thanks

Halfpenny.