Inheriting a company which owns property

Dunelm

Registered User
Messages
13
I am likely to inherit a company in the future and just wanted to ask a couple of questions,

This company doesn’t trade but instead owns about 10 properties (about half residential and half commercial) which it rents out, to be honest I don’t know that much about it and I don’t have a specific question but just looking for general advice or comments. If I was to inherit it I of course would get professional advice.

I note that on here owning property through a company is generally not recommended, are there any cases where it makes sense to keep property in a business?
I would have to pay tax on this inheritance, the company doesn’t have much cash but presume property could be liquidated to do this.
without knowing more details is is possible that entrepreneurial relief or retirement relief could be beneficial in this situation?
I presume if I sell the properties within the company CGT will apply just like an individual selling an asset?
 

Brendan Burgess

Founder
Messages
44,851
You and the current owner absolutely need to get tax planning advice now.

Maybe get it from whoever suggested using the company to buy the properties?

I am not a tax expert, but this is my first run at what will probably happen.

1) If the company sells a property, the company will pay CGT on the gain. However, the net money is still inside the company so you won't be able to use it to pay CAT.

2) You will have to extract the cash from the company which will result in a tax hit for you.

Let's say, for example, that the figures are as follows:

Value of property €5m
Original cost of property: €2m.

If the company sells the property now, it will pay CGT of €1m.
So you have a company with

Cash €4m.

You will inherit a company with €4m cash and pay €1.3m in CAT.


If you wind up the company and distribute the cash, you will pay no further CGT as the proceeds will be the same as the price you acquired it at.

Brendan
 

Brendan Burgess

Founder
Messages
44,851
If you just inherit a company with €5m of property then you will pay €1.6m CAT.

Then the company sells the property and the company pays CGT of €1m.

You wind up the company and get the proceeds without any further tax.

I presume that you could argue that the probate value of the company is not €5m but €4m because of the CAT liability.

Brendan
 
Last edited:

Brendan Burgess

Founder
Messages
44,851
If the benefactor owned the property in his own name, the Capital Gains would disappear on death.

You would inherit €5m and pay CAT on the €5m.

Brendan
 

Dunelm

Registered User
Messages
13
Thank you so much for your reply Brendan.

Asked some questions at the weekend and apparently there is a section 72 life insurance policy set up with then aim of paying any CAT due.

Not very sure why the property is owned by the company rather than directly but it seems there must have been some sort of tax incentives at the time, the properties would have been built by another company owned by the benefactor rather than bought so maybe that makes a difference,

There is a tax advisor involved so hopefully there is a plan!
 

Dunelm

Registered User
Messages
13
In response to a discussion on another thread I just wanted to update this with my plan for the future.

I was thinking of starting to take a small salary from this company and paying into an executive pension. Then at some point in the future increasing this salary for a few years ( probably after retirng or taking career break fro paye employment) to increase the max size of the EPP.
 

Brendan Burgess

Founder
Messages
44,851
You say in the other thread:

Non salaried, 25% Director, of family company which currently generates small profits but has substantial assets. (prefer to plan my financial future independent of this- and then if this generates money in the future it will be a bonus)

How did you acquire this 25% shareholding?

It would be very risky to take advice on such a substantial amount and such a complex issue from an online forum.


There is a tax advisor involved so hopefully there is a plan!

You really need to sit down with whoever controls this company and their tax advisor to work out the plan.

If it were a trading company accessing 25% of it might be difficult. But it might be possible to transfer 25% of the properties to you without impacting the future of the company.

The other shareholders might be burying their heads in the sand but sometimes, it's better to take the tax hit now and get the assets or the proceeds into your own name.

Brendan
 
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