Brendan Burgess
Founder
- Messages
- 54,757
I referred a social contact who asked me about this to askaboutmoney, but the posts on it are all quite old. So I will write an up to date post on the issue to check if my understanding is correct, and if there are any tax planning issues. I will simplify some of the facts to focus on the key issues. I have told him to get tax advice.
Purchase price: €100k (IR£ equivalent)
Date of purchase: 1988
Value in 2016: c. €1m
Company is not trading and has no other assets or liabilities.
I presume he set up the company with no share capital in 2008.
He distributed the rent to himself as dividends
Option 1 - The company sells the property and then the company is liquidated and he receives the proceeds
Sales proceeds: €1m
Indexed cost: €150k (€100k @1.553)
Capital gain: €850k
CGT @ 33%: €280k
Net proceeds in company: €720k
Liquidate the company and receive €720k
Cost: 0
Capital Gain: €720k
CGT @33%: €240k
Net proceeds in his hands: €480k
Note that the effective rate of tax through holding the property in a company is 52%.
Option 2 - Sell the company instead of the property
Sales proceeds: €720k
CGT @33%: €240k
Net proceeds in his hands: €480k
Option 3 - Liquidate the company and distribute the property to himself
I presume that there is no advantage in doing this?
If he liquidates the company, the company will pay CGT on the disposal of the property.
He will still receive net assets of €720k on which he will pay CGT.
Purchase price: €100k (IR£ equivalent)
Date of purchase: 1988
Value in 2016: c. €1m
Company is not trading and has no other assets or liabilities.
I presume he set up the company with no share capital in 2008.
He distributed the rent to himself as dividends
Option 1 - The company sells the property and then the company is liquidated and he receives the proceeds
Sales proceeds: €1m
Indexed cost: €150k (€100k @1.553)
Capital gain: €850k
CGT @ 33%: €280k
Net proceeds in company: €720k
Liquidate the company and receive €720k
Cost: 0
Capital Gain: €720k
CGT @33%: €240k
Net proceeds in his hands: €480k
Note that the effective rate of tax through holding the property in a company is 52%.
Option 2 - Sell the company instead of the property
Sales proceeds: €720k
CGT @33%: €240k
Net proceeds in his hands: €480k
Option 3 - Liquidate the company and distribute the property to himself
I presume that there is no advantage in doing this?
If he liquidates the company, the company will pay CGT on the disposal of the property.
He will still receive net assets of €720k on which he will pay CGT.
Last edited: