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Dormant company

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stockton
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Dormant company

#131178

Postby stockton » April 10th, 2018, 1:13 pm

My house is owned by a company, originally intended to be a trading company. As such the company has no income, but may have expenditure from time to time.

Are there any disadvantages in telling HMRC that the company is "dormant", or is this something that can be switched on and off as the need arises ?

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Re: Dormant company

#131181

Postby Charlottesquare » April 10th, 2018, 1:22 pm

Do you mean that you live in a house owned by a company you/ your family controls?

If you do then I would strongly advise you approach a friendly accountant as there are certainly tax ramifications arising from such arrangements.

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Re: Dormant company

#131191

Postby stockton » April 10th, 2018, 1:58 pm

In principle the answer to your question is yes, but it is somewhat more complicated than that.

Could you provide some pointers to the tax ramifications ?

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Re: Dormant company

#131202

Postby Alaric » April 10th, 2018, 2:23 pm

stockton wrote:Could you provide some pointers to the tax ramifications ?


Capital Gains Tax on ultimate sale would be one and if the house is not already owned Stamp Duty another.

It's a shame really that CGT more or less prevents it, but a system where each house was owned by a Company would make to process of buying and selling houses so much simpler legally, perhaps at the cost of accounting and filing consequences down the line.

BLT owners if they incorporate their property assets must have to face this.

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Re: Dormant company

#131238

Postby Charlottesquare » April 10th, 2018, 4:20 pm

Benefit in kind rules spring to mind (Personal use of company asset) also ATED (Annual Tax Enveloped Dwelling) though that may not be on point, depends on property value. CGT is of course an issue as any gain is the company's not the individual's so no PPR relief.

Any particular reason limited company rather than individual owns the property?

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Re: Dormant company

#131398

Postby stockton » April 11th, 2018, 10:59 am

Charlottesquare wrote:Any particular reason limited company rather than individual owns the property?


Purely historic. There was going to be a business but things took so long that retirement arrived first.

It is interesting to find taxes that I never knew existed, but on further investigation I do not think that they are relevant.

Does anyone have experience relevant to the original question about dormancy ?

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Re: Dormant company

#131413

Postby PinkDalek » April 11th, 2018, 11:38 am

stockton wrote:
Charlottesquare wrote:Any particular reason limited company rather than individual owns the property?


Purely historic. There was going to be a business but things took so long that retirement arrived first.


I may be misremembering but was it you who was buying, refurbishing and selling etc? Perhaps then treated as a trade. Was the property therefore appropriated from trading stock and, if so, do the accounts reflect this and what did the Corporation Tax computation show? I may be wrong but is that not a market value event?

It is interesting to find taxes that I never knew existed, but on further investigation I do not think that they are relevant.


Can you explain why you think potential Corporation Tax on chargeable gains may not be relevant? Similarly Charlottesquare's point about the lack of rent being charged to you.

Does anyone have experience relevant to the original question about dormancy ?


You say the company may have expenditure from time to time. Possibly property repairs. That doesn't sound like it will be dormant then but it may be in the intervening periods of account.

This what Gov.UK says on the matter:

https://www.gov.uk/dormant-company/dorm ... ration-tax
https://www.gov.uk/dormant-company/dorm ... nies-house

I agree with the others though, you should seek professional advice.

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Re: Dormant company

#131463

Postby stockton » April 11th, 2018, 2:42 pm

PinkDalek wrote:I may be misremembering but was it you who was buying, refurbishing and selling etc? Perhaps then treated as a trade.

You are misremembering.

Can you explain why you think potential Corporation Tax on chargeable gains may not be relevant? Similarly Charlottesquare's point about the lack of rent being charged to you.

Neither are immediately relevant. They may be at some time in the future.

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Re: Dormant company

#131474

Postby Charlottesquare » April 11th, 2018, 3:40 pm

stockton wrote:
Charlottesquare wrote:Any particular reason limited company rather than individual owns the property?


Purely historic. There was going to be a business but things took so long that retirement arrived first.

It is interesting to find taxes that I never knew existed, but on further investigation I do not think that they are relevant.

Does anyone have experience relevant to the original question about dormancy ?


Well, if you live in the house there is a very good chance they are, but if you do not fair enough.

https://www.gov.uk/hmrc-internal-manual ... l/eim11301

There surely has to be some costs incurred by company re its property, council tax, insurance, water, heat & light etc, accordingly the company is not dormant though may, of course, be outwith the charge to CT at present (the two are not the same thing)

I would, in your circumstances ,strongly suggest you have a chat with an accountant (I have to promote the well being of my learned colleagues), residential properties held within companies is a hot topic these days and as and when it is ever sold it will very likely be auto reported to HMRC by the Land Registery (or whatever you have down south of the border) so you do really want to have checked that a deemed BIK cannot be attached to you, as an individual, by HMRC in the future.

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Re: Dormant company

#131716

Postby stockton » April 12th, 2018, 4:39 pm

Charlottesquare wrote:There surely has to be some costs incurred by company re its property, council tax, insurance, water, heat & light etc, accordingly the company is not dormant


You appear to have arrived at the origination point for my questions. According to the HMRC guidance such a company does appear to be dormant.

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Re: Dormant company

#131740

Postby Charlottesquare » April 12th, 2018, 6:09 pm

stockton wrote:
Charlottesquare wrote:There surely has to be some costs incurred by company re its property, council tax, insurance, water, heat & light etc, accordingly the company is not dormant


You appear to have arrived at the origination point for my questions. According to the HMRC guidance such a company does appear to be dormant.


Maybe explaining what "my house" means in the context of the question would assist, evidently if it belongs to the company it is the company's house not your house, "my house" possibly implies you are occupying it given you do not own it ,which may well give rise to a need to make returns to HMRC .

Why/ for what purpose is company still holding the property since the trading activity is no longer, you state, on point? What is it doing with this asset?

If the property is say still held as trading stock (in current assets in balance sheet) it is maybe still there to be developed? If reason for holding has changed, such that it has say become a fixed asset ,you may have a taxable trading receipt at then market value ((Sharkey v Wernher (1955) 36 TC 275) as advised earlier in this thread, as asset gets removed from trading stock and posted to fixed assets a profit may possibly be booked.

Also, if property is still held for resale lodging CT600 and arguing the "trade" (presumably buying selling property) continues might be to your advantage later if a sale was to arise, c/fwd losses might be useable in future.

As I advised there may be BIK issues if you use the property or have it available for your use, there could be(don't know) s455 issues re directors' loans if say a rent ought to have been paid to mitigate BIK issues but has not (and if this was case company would not be dormant re CT anyway), the company is certainly unlikely to be dormant for Companies House purposes (It has transactions) so accounts are anyway needed ( and of couse real pain if say non Company's House compliance lodging accounts was to lead to striking off, all assets (house) would then vest with the Crown)

So given these possible scenarios surely there is a strong case for sitting down with an accountant who you make aware of all the facts and who then advise you, any other approach is dangerous as often with tax etc it is teasing out information from clients (face to face) that gives a true understanding;- I say this as someone who has tried to tease facts out of clients for the best part of 32 years.

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Re: Dormant company

#131762

Postby stockton » April 12th, 2018, 8:03 pm

I have omitted most of the facts simply because they are not relevant to the original question, and they appear to simply be confusing matters. Those facts (it is not a property trading company and technically it is not yet a house) make it worthwhile being aware of the matters you raise, but otherwise are irrelevant.
The original question was about dormancy and if it had any advantages or disadvantages, given that HMRC appear to be encouraging companies to declare that they are dormant.

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Re: Dormant company

#131912

Postby Charlottesquare » April 13th, 2018, 11:33 am

stockton wrote:I have omitted most of the facts simply because they are not relevant to the original question, and they appear to simply be confusing matters. Those facts (it is not a property trading company and technically it is not yet a house) make it worthwhile being aware of the matters you raise, but otherwise are irrelevant.
The original question was about dormancy and if it had any advantages or disadvantages, given that HMRC appear to be encouraging companies to declare that they are dormant.


Well, there are still areas I would have checked out professionally before telling HMRC it has ceased trading (or ceased having any economic activities) as there can sometimes be unexpected consequences of actions which very often cross into other matters/taxes beyond those featuring within particular client questions (vat often being one of them and often being particularly complex re property)

However as I have no knowledge of what the company actually was doing with the property (building a house?, developing land? are possibles as you have now stated it is not yet a house (dwelling))) there is likely nothing more I can add.

The reason one uses professionals is often more to do with not getting answers to particular questions the client believes they want answered but getting input into areas they did not even realise there was a question that was relevant. It also gives someone to sue if their advice is poor and you suffer loss.

So lapsing tax losses from cessation would certainly be one concern I would have from the scant information offered but also say cessation of trade triggering vat deregistration might well be another, advice is only as good as the information clients make available and why face to face consultations are often the only sensible approach.

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Re: Dormant company

#132868

Postby bluedonkey » April 17th, 2018, 4:50 pm

I very strongly second Charlottesquare's advice. Speak to a good accountant sooner rather than later. Most will offer an initial half hour meeting free of charge.


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