CGT on residential property owned by a Ltd co

[DKL]

If a Ltd co sells a wholly owned residential property there will be CGT to pay on any profit less expenses I believe. The business is not buying/selling property. This is 18/28% depending on tax banding.
If/when the Ltd co is closed, the value of the property is simply part of the funds held by the co and taxed accordingly to allow access by the directors.
Assuming entrepreneurs relief can be claimed this is 10%.
Have I got that about right?

[anonymous-user]

Ltd Co. pays Corporation Tax not CGT. Currently 19% and due to reduce to 17%.

The company has to be a trading company and you need to hold at least 5% of the shares to get ER.

[Eric Mc]

Also, a limited company does not get the Annual Capital Gains Tax Allowance (currently £12,000 per person).

[DKL]

Roman Rhodes said:

Ltd Co. pays Corporation Tax not CGT. Currently 19% and due to reduce to 17%.

The company has to be a trading company and you need to hold at least 5% of the shares to get ER.

I thought you only paid CT if your business was buying and selling property, otherwise it is CGT.

[anonymous-user]

DKL said:

Roman Rhodes said:

Ltd Co. pays Corporation Tax not CGT. Currently 19% and due to reduce to 17%.

The company has to be a trading company and you need to hold at least 5% of the shares to get ER.

I thought you only paid CT if your business was buying and selling property, otherwise it is CGT.

Ltd Co's pay Corporation Tax on profits. Individuals and sole traders will pay CGT on the profits from the sale of assets.

Eric will confirm any nuances (or if I'm wrong) as he is an accountant and I'm not!

There are rules around qualification for ER that you need to be aware of too.

[DKL]

This was what I was going on but I'm happy to be corrected.
https://www.gov.uk/tax-sell-property/businesses

[Eric Mc]

Companies do indeed pay Capital Gains Tax on disposals of capital assets. However, the RATE of Capital Gains Tax paid by limited companies is the same as the Corporation Tax rate - so effectively, they are paying Corporation Tax on the gain.

[DKL]

Fair enough, makes the maths easier! Thanks Eric
Presumably the original purchase cost is offset against the CT bill - so CT on the profit not the entire sales amount. I gather the purchase price is not tax deductable in the first instance.

[Alpinestars]

DKL said:

Roman Rhodes said:

Ltd Co. pays Corporation Tax not CGT. Currently 19% and due to reduce to 17%.

The company has to be a trading company and you need to hold at least 5% of the shares to get ER.

I thought you only paid CT if your business was buying and selling property, otherwise it is CGT.

No. Companies don’t pay capital gains tax. They pay corporation tax on profits, which includes corporation tax on gains. The type of profit is determined by the activity - hence the distinction between income (buying and selling) and capital. There are different rules for deductions etc, but the net profit, whether capital or income, is subject to corporation tax.

[Alpinestars]

DKL said:

Fair enough, makes the maths easier! Thanks Eric
Presumably the original purchase cost is offset against the CT bill - so CT on the profit not the entire sales amount. I gather the purchase price is not tax deductable in the first instance.

Proceeds less original cost (including stamp duty, legal fees etc etc) less indexation allowance (if applicable) is broadly the calculation.

[Eric Mc]

Isn't Indexation being withdrawn or has it been withdrawn already?

[Alpinestars]

Eric Mc said:

Isn't Indexation being withdrawn or has it been withdrawn already?

Yep. Frozen at 31.12.17 from memory. So assets bought before then can be indexed up to then.

[DKL]

Excellent, thanks all.