Ltd Company - Reinvesting profits of a property sale - Tax question

[deezi]

Hello,

Newbie questions, hoping someone can help

I had a property owned under a limited company which i have recently sold. i would like to reinvest the profit in other properties, however i am not clear on the tax implications.

1. I understand that if i do not do anything with the profit, i would be taxed corporation tax at 19%. However if i choose to invest the profits in a new property would i still be liable to the 19% tax?

2. Assuming the corporation tax is not relevant if i choose to reinvest the profit in other properties, would i have to do the reinvestment in the same accounting year as when the profit was realized in order to not be liable to the corporation tax? Or can i reinvest next year for example and reclaim the corporation tax (that i assume i would have to pay for the current year)?

Thanks in advance

Deezi

 

[NortonBishop]

The purchase by the company of a further residential property would not reduce the exposure to CT.

 

[neilsolaris]

Doesn't rollover relief apply here? I might have missed it, but it's a business asset you sold isn't it, not residential? Here's what the relief is about.

Rollover relief allows a trader to defer the payment of capital gains tax where the disposal proceeds of a business asset are reinvested in a new business asset. The deferral is achieved by deducting the chargeable gain from the cost of the new asset. It can be where proceeds are fully or partially reinvested.

And the time limit is 36 months after the sold the asset, in such to buy the replacement.

 

[deezi]

The purchase by the company of a further residential property would not reduce the exposure to CT.

Thank you for the swift response

Doesn't rollover relief apply here? I might have missed it, but it's a business asset you sold isn't it, not residential? Here's what the relief is about.

Rollover relief allows a trader to defer the payment of capital gains tax where the disposal proceeds of a business asset are reinvested in a new business asset. The deferral is achieved by deducting the chargeable gain from the cost of the new asset. It can be where proceeds are fully or partially reinvested.

And the time limit is 36 months after the sold the asset, in such to buy the replacement.

Thank you for highlighting this. I had a look at the details for rollover relief and i am not 100% sure it is relevant for my scenario.

1. it mentions Capital Gains Tax, whereas i understand that a limited company pays corporation tax rather than CGT

2. it mentions Self Assessment, which is for individuals

unless i am missing something?

 

[neilsolaris]

Thank you for the swift response



Thank you for highlighting this. I had a look at the details for rollover relief and i am not 100% sure it is relevant for my scenario.

1. it mentions Capital Gains Tax, whereas i understand that a limited company pays corporation tax rather than CGT

2. it mentions Self Assessment, which is for individuals

unless i am missing something?

I believe it is available for companies as well. Even though chargeable gains for a company gets included in your taxable profit, unlike an individual.

Rollover relief

A 60-second refresher and worked examples

www.accaglobal.com

 

[Argentum Tax]

If you choose to invest the profits from the sale of your property into a new property, you would not be liable for corporation tax on those profits.

@deezi Please note, however, that if the property is a residential property (either the property being sold, or the one being bought, or both) then ‘rollover relief’ cannot be claimed. Therefore your company would be liable to pay Corporation Tax on the gain on sale of the property.

This is because HMRC do not consider a dwelling house etc to be a business asset, even if it is rented out by the company.

As others have said, you really need to consult a suitably qualified accountant or tax adviser.