Monthly Tax Idea – December 2011

Tax exemption for groups selling a property.

Trading groups that are selling one of their trading subsidiaries, or are thinking of selling part of the trade carried on by a member of the group, can now take advantage of an opportunity giving a tax exempt sale of the premises from which that trade is carried on. Groups that could be in line for a tax saving from this new opportunity are those which hold legal ownership of their trading premises separate from the trading company. A lot of groups gather their property interests in a property owning subsidiary which then rents the property to the trading subsidiaries. A few years ago groups were introducing this sort of “OpCo/PropCo” structure and this idea could be of value in these circumstances.

By taking advantage of recent changes in two areas of taxation of companies’ chargeable gains, it is possible to avoid a chargeable gain on the sale of the property when the trading subsidiary is sold. There is no disadvantage to the new owner of the company – as their base cost in the property for tax purposes will be market value.

A certain amount of restructuring will be required before the sale is agreed to secure this advantage. This could involve some cost and there is likely to be a stamp duty cost. But in many cases, possible tax savings are likely to be greater than the extra costs of implementing this planning.