Question from Christina updated on 4th August 2017:
We are looking at restructuring our financial affairs. We currently own an investment property in a QC. (We did not transfer it to an LTC regime as the rental generated a profit). We want to sell another rental we own into the QC. There is a mortgage on this property.
After the transfer we would expect the company to break even with no taxable income or liability. Is there any reason we should not do this given the QC regime is now archaic? Basically, we still want to make sure we can release capital gains tax free if we decide to sell one of the properties.
Our expert Nick Ashford responded:
The qualifying company regime is now somewhat unique in that no new QC companies can now be formed. It has the advantage of being able to retain profits and have them taxed at the 28% corporate tax rate which is lower that the top personal bracket.
It also allows for dividends to be distributed tax free from capital reserves. This is a distinct advantage over a standard closed company which must be liquidated if capital reserves are to be distributed tax free.
Nick Ashford and the team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.