Reorganising company ownership of properties

Although there may be good commercial reasons for the transfer of a property, such as reducing exposure to risk or reorganising shareholdings, the threat of crystallising a tax charge may be an unacceptable obstacle. This can be overcome with some careful planning.

Situations where the commercial reorganisation of a company’s ownership of properties into a number of separate companies may be appropriate include:

• • separating residential and commercial property portfolios
• • removing a commercial property from the company’s trading activities
• • dividing the business and its assets between the shareholders

Using specific legislation set out in the Insolvency Act 1986, a company can extract its property or property portfolio from its trading activity, or rearrange the ultimate ownership of the properties between its shareholders, without crystallising a tax charge on either the company or its shareholders.  The proposed reorganisation should, however, be approved by HM Revenue & Customs before its implementation. The end result will be that the property or properties will remain within a (new) company, any potential corporation tax arising on the transfer will be held over and no income tax will be charged on the shareholders.

If you wish to de-risk your business or property ownership we can assess with you whether the reorganisation you have in mind will be acceptable to HM Revenue & Customs and, if so, obtain their agreement.  Our Tax and Restructuring & Insolvency teams will work closely with you and lawyers tasked with drafting the legal agreements necessary.