Can a Trust have a shareholding in a LAQC?

Question from Leo updated on 23rd February 2011:

Can a Trust have a shareholding in a LAQC, and if so can the loss that the Trust receive remain in the Trust until there is trading profit to offset against/ or can the loss be offset against the beneficiary's income?

Our expert Mark Withers responded:

It is possible for a trust to own shares in a QC, it's not common though because there can be problems remaining eligible for QC status, remember you can have only 5 shareholders and a trust doesn't necessarily count as only one. Also, if the QC pays a dividend this must be flowed through the trust ond out to a living beneficiary or QC status is lost.

Interestingly, this is altering for Look through companies, under the LTC regime there is no obligation on trustees to allocate the income as beneficiary income. Under the new LTC rules where there remains a 5 shareholder limit, trusts will be regarded as one look through counted owner unless the income the trust has been allocated by the LTC in that income year and in all the proceeding 5 income years was paid as beneficiary income. Losses flowed to a trust can only be used by the trust itself. They can't be distributed to beneficiaries. 

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.


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