Tax Consultancy

A long-standing client of ours in the construction industry had acquired land for use as a storage area for its business. However, two things happened which caused a tax problem. Firstly, the company's activity level decreased so that the value of the company's other assets and its profitability decreased and some of the land became surplus to requirements and was rented out. Secondly, the value of the land increased substantially as a result of market forces. The combination of these factors meant that the land became the company's most significant asset on its balance sheet and also the rent contributed a significant proportion of the profits.

The managing director wanted to give some of his shares to his son. However, we cautioned him that, as things then stood, Revenue & Customs could argue that the land had become a significant investment asset which would stop the availability of the 10% rate of Capital Gains Tax and the ability to hold over the capital gain on the shares.

Instead of merely accepting this as a problem, though, we were able to advise on a method of extracting the land and some other property from the company without attracting any liabilities to tax or Stamp Duty Land Tax. Taking the properties out of the company was also found to be desirable to protect the owners' wealth from actions of creditors of the construction company if things go wrong on a particular project.