We have purchased a plot of land in Birmingham, currently with an old bungalow on it, that has permission for two houses. The land at present is in both our names. My husband is a property developer with his own limited company and we intend to develop both houses, live in one and sell one. The one we sell needs to be in the name of the limited company. Do we have to sell the plot to the company (in which case the company will be liable for stamp duty land tax) or can we just transfer the plot into the limited company’s name for development whereby the company will get all the profits and we will just be paid back on completion for the original value of the land?

Arthur Weller replies:
You could retain the plot of land in personal ownership and grant the company, for no consideration, permission to build a house on your land. (A clause should be included in the permission that you have the right to terminate the permission at any time.) When the time comes to sell the completed house, the purchaser will make two purchases. He will purchase the land underneath the house from you personally and purchase the building from the company. This will avoid any current stamp duty land tax (SDLT) because no transfer of any land is currently being made. There is no SDLT on such a grant of permission. See S48(2) second and third bullet points, and SDLTM10050. This is an ‘exempt interest’. There will be no capital gains tax (CGT) on such a grant of permission, because no capital sum is derived from the disposal, and if no capital sum is derived there has been no disposal for CGT purposes. See CG12955 Capital sums derived from assets- section 22 (1) (d) TCGA 1992- use or exploitation of as ‘a deemed disposal within section 22(1)(d) when a capital sum is received in circumstances where the owner’s title to land is unaffected, for example where he remains entitled to full possession of the land.’ See CG70295 - Land- disposal of interest in land- capital sums derived from assets. You may want to argue that since here there is a disposal to a connected person, any consideration is ignored, and the focus is on the market value of the asset transferred, per CG14530 Consideration for disposal- market value rule. However since here ‘the owner’s title to land is unaffected, he remains entitled to full possession of the land’, I would argue that the rules in section 22 take precedence, and there has been no disposal for CGT purposes because no capital sum has been derived from the disposal.