JG EdinburghA If the properties are held in a company, it may be advantageous to sell them in different accounting periods. The level of the company’s profit will determine the tax rate and the gain on the proper
ty will be included in the profits when establishing the rate of tax payable. Assuming there are no “associated companies”, if its taxable profits exceed £1.5 million, it will pay tax at 28 per cent. If the profits are less than £300,000, the tax rate will be 21 per cent. Profits over £300,000 and less than £1.5m are taxed at 21 per cent on the first £300,000 and 29.75 per cent on the rest.
If, for example, the corporation tax rate payable by the company in one year is 28 per cent, and 21 per cent in the following year, it may make sense to delay the sale of one (or both) of the properties until the later year.
Of course if the properties are owned by a company then there is an additional tax charge on profits when they are extracted from the company (for example by dividend). There may be other ways to extract value from the company, such as bonuses, pension contributions, or a capital return either on a sale of shares which could be a sale to a third party, a liquidation or a share buy-in, depending on the precise circumstances. Each of these options has a different tax outcome which should be fully explored before any action is taken.
It is essential that you make all of the facts available to a professional tax adviser so they can provide you with appropriate advice.
• Andrew Addie is tax director at Grant Thornton, Scotland.
• If you have a question you need answered, write to Jeff Salway, Personal Finance Editor, The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or e-mail:
. These answers are for guidance only. No responsibility for loss occasioned by any person acting, or refraining from acting, as a result of these answers can be accepted by Grant Thornton or The Scotsman Publications Ltd
The full article contains 416 words and appears in The Scotsman newspaper.
