Transfer asset to director (only one director & SH)

[Cindyyyy]

Hi there,
I am ltd director as well as the sole shareholder & going to purchase properties under the company. My question is will i be able to transfer those assets into my personal name (maybe once I am going to close the ltd one day in few decades), if I wish to? Company is running smoothly now & as I have no other directors or shareholders that have control over this company.

Highly appreciate your kind response
Thank you in advance

 

[DWS]

Yes you could transfer the property, it would have to be at MV and any gain on the property would then be liable to C/Tax, you would also have to pay tax yourself on the distribution and there may also be SDLT to consider, but I would suggest you seek professional advice.

 

[PCD]

You can't just transfer assets owned by the company to yourself without considering the tax aspects. You need to remember that the company is a separate legal entity and the company's assets are not yours. The company can however sell the assets to you at a market value. Appropriate professional advice should be taken before buying properties through a limited company to ensure that you understand the full tax implications of doing so. I also think that it only a matter of time before a government decides to look at taxing residential properties owned by limited companies more heavily perhaps by removing mortgage interest relief or extending ATED.

 

[Gyumri]

I am ltd director as well as the sole shareholder & going to purchase properties under the company. My question is will i be able to transfer those assets into my personal name (maybe once I am going to close the ltd one day in few decades)

You can do so. The company may need to pay capital gains tax on the transfer and you may need to pay stamp duty land tax.

Another option is that your company could buy a property on your behalf if you've provided the purchase funds and then hold it as the legal owner on trust for you as the sole beneficiary.

The legal transfer in the future could be done by you signing the TR1 on behalf of the company with you as the transferee for the sum of £1.

No sdlt tax or capital gains tax would be payable - but check this with an accountant and solicitor.

 

[DWS]

You can do so. The company may need to pay capital gains tax on the transfer and you may need to pay stamp duty land tax.

Companies do not pay Capital Gains Tax it will be Corporation Tax also the transfer will be taxable on the shareholder as dividends

 

[Gyumri]

Companies do not pay Capital Gains Tax it will be Corporation Tax also the transfer will be taxable on the shareholder as dividends.

Correct - corporation tax will be based on the capital gains made by the company in regard to the property less any allowable expenses.

There would surely be no tax as dividends if the OP hasn't drawn a dividend. The advice above about looking properly at the tax consequences of buying a property with a view to transferring later is rhe best that can be given without knowing who is financing the purchase and what aim is to be achieved in the LTD holding the title.

 

[DWS]

The

Correct - corporation tax will be based on the capital gains made by the company in regard to the property less any allowable expenses.

There would surely be no tax as dividends if the OP hasn't drawn a dividend. The advice above about looking properly at the tax consequences of buying a property with a view to transferring later is rhe best that can be given without knowing who is financing the purchase and what aim is to be achieved in the LTD holding the title.

The OP was talking about transferring the property to themselves rather than buying it from the Company so I take this to mean they would not have the funds, in which case the only other way is to get the funds from the Company for the transfer, this is either salary or dividends which would both be taxable.
Agreed that professional advice is required.

 

[Gyumri]

The OP's company or somebody has the funds to buy property now but I believe the OP is talking about transferring in the future.

In which case the purpose of the Ltd holding the company as opposed to the OP over the long term would need to be established to take into account the tax consequences.

That would need the OP to consult an accountant.

 

[ChrisCallaghan]

Hi @Cindyyyy ,

I think previous comments are in the right direction. It might be sensible to consider closing the company by way of a Members Voluntary Liquidation (MVL). This process would close the company, and legally transfer its assets (the properties) out of the company, and into the shareholders' names (in this case, you). Though I am not a tax advisor, many of my clients felt this was the most tax efficient way to close their companies and get the properties out.

I would suggest organising a meeting with an accountant, specifically one that provides tax planning advice. If the MVL is then something you wish to explore, myself and/or the other insolvency regulars here on UKBF would be happy to offer you some free advice and quotations.

If you would like to some further reading on MVLs, see the following link: https://www.wilsonfield.co.uk/closing-limited-company/members-voluntary-liquidation-mvl/

 

[The Resolver]

The first step to take is to look at the Articles of Association. If they are the Model Articless unamended then none of the above steps could be taken until an amendment had been undertaken. Scroll down to the Stop Press item at the bottom of the page at www.Mr2PerCent.com

 

[DWS]

The first step to take is to look at the Articles of Association. If they are the Model Articless unamended then none of the above steps could be taken until an amendment had been undertaken.

So is it the case that with every sole Director Company with model articles, none of the decisions made for example the issue of dividends are valid unless the articles are amended?

 

[The Resolver]

So is it the case that with every sole Director Company with model articles, none of the decisions made for example the issue of dividends are valid unless the articles are amended?

Until such time as a judge in a subsequnt case finds reason to determine that Hashmi v Lorimer-Wing was incorrect, and assuming the Model Articles have not been amended to allow for single Director Board meetings, then the answer to your question is 'yes'.

 

[DWS]

Until such time as a judge in a subsequnt case finds reason to determine that Hashmi v Lorimer-Wing was incorrect, and assuming the Model Articles have not been amended to allow for single Director Board meetings, then the answer to your question is 'yes'.

Just looking into this a bit more but what about the case of
Re Active Wear, in this case the judge came up with the opposite view to the Hashmi v Lorrimer case?

 

[The Resolver]

Just looking into this a bit more but what about the case of
Re Active Wear, in this case the judge came up with the opposite view to the Hashmi v Lorrimer case?

A different decision albeit on facts that vary e,g, as to the whether there had been more than one Director in the past and whether an amendment had been made to the Model Articles.

But importantly it does not invalidate Hashmi as it was an unreported decision of the same level of court and so has no greater precedent value. A court in the future can still decide to follow the Hashmi line. So the wise advice to sole directors remains the same following Hashmi. It is just not worth the risk of not actng in accordanec with the Hashmi ruling. when it can be complied with so easily.

 

[Cindyyyy]

Hi all,
Thank you once again for your kind responses.
My plan is to purchase few properties under my construction ltd company name & maybe transfer it to my name in near future. As the funds I will be using for down payment of mortgage is from myself. However I have a question running in my mind, will i be able to live in one of those properties if I wish to?

Highly appreciate your kind reply, thank you in advance.

 

[Cindyyyy]

Hi all,
Thank you once again for your kind responses.
My plan is to purchase few properties under my construction ltd company name & maybe transfer it to my name in near future. As the funds I will be using for down payment of mortgage at the first is from myself, but I don’t think i will be having enough funds to purchase it all again from this company in future instead I need the properties to be transferred to my name in few years time (I’ve understood regarding the corporation tax & fee that would be charged), is it possible? I have another question running in my mind, will i be able to live in one of those properties if I wish to?

Highly appreciate your kind reply, thank you in advance.

 

[Scalloway]

will i be able to live in one of those properties if I wish to?

The best way to do that would be as a tenant of the company, paying a commercial rent