dividend in specie

[loosemarbles]

Before I head off and start asking accountants and tax people, anyone with experience in taking a property out of Ltd company through dividend in specie? Specially, whether it would be subject to a 'normal' tax position or would it be subject to Entrepreneur Tax Relief, which would be applicable if the shares were sold?

[TNJ]

It would be a market value disposal by the company (so potentially giving rise to corporation tax on a gain) and, for the shareholder, a dividend subject to income tax equal to the market value of the property. Should be no SDLT though.

[loosemarbles]

Thanks. If the property was sold as part of a company sale, then the whole amount would full under ETR, but there is nothing concrete or otherwise as to whether ETR would apply if the property was extracted prior to sale.

[wattsm666]

loosemarbles said:

Thanks. If the property was sold as part of a company sale, then the whole amount would full under ETR, but there is nothing concrete or otherwise as to whether ETR would apply if the property was extracted prior to sale.

A dividend in specie is a distribution, so subject to income tax. ER is not available for an extraction like this.

On sale it can sometimes qualify as suggested. Is a Company sale likely in the new future, there might be an alternative stop gap?

[loosemarbles]

hhmm ... feared that it would be it be classed as a distribution. Sale is very much on the horizon, but if the property was outside of the deal then then easier all round, but it must be tax efficient.

[wattsm666]

loosemarbles said:

hhmm ... feared that it would be it be classed as a distribution. Sale is very much on the horizon, but if the property was outside of the deal then then easier all round, but it must be tax efficient.

It shouldn't complicate a deal at all, it happens a lot. However, you could always sell it how and owe the money to the company, which then gets settled at sale. Problem is if it doesn't complete you can run into bik and s.455 issues. Speak to your accountant to fully understand this.