A limited company bought a freehold property in 1982 and converted it into 4 flats and 1 office on the ground floor.  The small tour operating company ceased trading in 1994 and converted the office into a flat.  Since 1994 the company flats have been used by shareholders and also partly let.  The company has been dormant since 2009 and the company shares held by a holding company and 4 family members, 25% each.  I wish to transfer the flats to 2 family shareholders.  The market value is approximately £77,000.  Could you estimate the approximate corporate tax and stamp duty that might be payable?

Arthur Weller Replies:

I do not have all the facts in front of me, but since the company has been dormant since 2009, it may well be considered a close investment holding company (CIHC) and therefore pay corporation tax at the main rate of 24%. The transfer to the shareholders is deemed to be at present market value, even though the company receives no consideration. The difference between the present market value and the acquisition cost is the capital gain on which the company will have to pay corporation tax. The shareholders are receiving a distribution from the company, and will therefore have to pay personal income tax on this, in the same way as if they had received a cash dividend. If this 'dividend in specie' is worded correctly, and the shareholders are offered the distribution without any cash alternative, then this distribution should not be subject to stamp duty land tax.