Capital gains tax question

[matt]

I wondered if someone could help me. I have just set up a ltd company to invest in property. We have a business account but the money we have is currently in a current account. We are very close to completing on the property. What I need to know is:
1. Do we need to put the property in the name of the Ltd company or can I put it in my own name?
2. Does the money have to come out of the business account when we pay for the property or can we leave it in the current account?

What I want to do is avoid capital gains tax which I think I may have to pay if we put the property in our name rather than in the company name.

Thanks for your help
Matt

 

[ArcSine]

The "Ltd" is, of course, shorthand for "limited liability", and hence the advantage of holding the property within the entity, over holding it personally. Generally, liabilities that arise against the property (injury lawsuit, e.g.) would only put the entity's assets (the property itself) at risk, while your personal assets would be insulated therefrom.

In the US you can obtain this advantage while still having the tax advantage you mention. Both "limited liability companies" (LLCs) and "S Corporations" give you the above-discussed liability protection while simultaneously avoiding an entity-level capital gains tax upon sale of the property. (The wording of your question implies an avoidance of the capital gains tax altogether, which generally isn't possible. What personal ownership of the property (as well as ownership through an LLC or an S Corp) would buy you is an avoidance of the double-hit of a tax bite at the entity level and at the personal level, as you'd have with traditional corporations.)

I don't know what country you'll be operating in, but the tax legislations of most countries have so-called "pass-through" entities similar to the LLC / S Corp.

As a side note, if you choose to operate with one of these pass-through entities, you'll want to be careful to "respect the entity's existence"; that is, maintain clear separation between the entity's accounts and your own. Failing to maintain that distinction puts you at risk of losing the liability protection the entity is intended to provide. So the answer to your second question is to pay the expenses from the entity's account.

Best of luck with your venture.

 

[Truemanbrown]

I wondered if someone could help me. I have just set up a ltd company to invest in property. We have a business account but the money we have is currently in a current account. We are very close to completing on the property. What I need to know is:
1. Do we need to put the property in the name of the Ltd company or can I put it in my own name?
2. Does the money have to come out of the business account when we pay for the property or can we leave it in the current account?

What I want to do is avoid capital gains tax which I think I may have to pay if we put the property in our name rather than in the company name.

Thanks for your help
Matt

Are you talking about UK Capital Gains Tax?

 

[og954]

Research "piercing the corporate veil" it is basically what ArcSine mentioned. If you open an ltd company and continue to use your own accounts then if for some reason you end up in court, the court will correctly rule that you are using the ltd company just to protect yourself and will then allow the plaintiffs to go after your personal assets. There also needs to be enough assets in the ltd company in order to maintain it's normal operations or else that is another way to pierce the corporate veil.

 

[Truemanbrown]

I wondered if someone could help me. I have just set up a ltd company to invest in property. We have a business account but the money we have is currently in a current account. We are very close to completing on the property. What I need to know is:
1. Do we need to put the property in the name of the Ltd company or can I put it in my own name?
2. Does the money have to come out of the business account when we pay for the property or can we leave it in the current account?

What I want to do is avoid capital gains tax which I think I may have to pay if we put the property in our name rather than in the company name.

Thanks for your help
Matt

Assuming that we are talking about UK Capital Gains then both ordinary taxpayers and limited companies have to pay tax on Capital Gains. Basically, the same rules apply for both ordinary taxpayers and limited companies except:-

1. Ordinary taxpayers receive an annual exempt amount on their capital gains. For 2011/12, the annual exempt amount is £10,600;
2. Capital Gains for limited companies include an indexation allowance, relating to the RPI;
3. Ordinary taxpayers pay CGT at a rate of 18% and 28% (for higher rate taxpayers). Limited companies pay CGT at the marginal Corporation Tax rate.

If you are going to use a limited company, you may find this blog useful!!!