Question:
If a successful partnership has an opportunity to develop their existing business premises to residential units and sell for a £500,000 profit, I believe this would be subject to income tax (trading). Planning permission has not yet been applied for. The business will be relocated to new premises. How can we structure the 'deal' to minimise tax. Can we somehow pay capital gains tax at 28% as opposed to income tax at 45% or better still even lower?
Arthur Weller replies:
You may want to consider transferring the property into a limited company. This may trigger capital gains tax and stamp duty land tax. The limited company would apply for planning permission, develop into residential units, and sell. The profits would be subject to corporation tax at 20%. There would be no National Insurance. This assumes that you can extract the final profits from the company in a tax efficient way (e.g. dividends received by a basic rate taxpayer).
