Squaring the tax circle - a bespoke tax solution to a property transaction

Blick Rothenberg assisted a client on the acquisition of a company owning a piece of land.

We advised on a substantial shareholder exemption and structured the deal in such a way that the timing of the availability of the relief facilitated the most tax efficient outcome.

The disposal of commercial property used by a trading company as its trading premises is a frequent scenario that has a number of tax challenges, particularly where the company is itself a subsidiary company within a group and the key shareholders hold their interests at the holding company level. Some issues are reasonably straightforward, in terms of the status of the property as a fixed asset, the incidence of stamp duty on a sale of the shares and stamp duty land tax on a purchase of the property. However, the capital gains tax position is not always straightforward, particularly given the transition from the taper relief regime into the entrepreneurs' relief regime.

Our client was faced with exactly this scenario, with a speculative housing group looking to acquire its commercial premises with a view to conversion to residential properties. We were able to devise a means to square the tax circle and arrange for the disposal of the company holding the premises to be exempt from corporation tax within the substantial shareholder exemption. We additionally arranged for the vendor’s shareholders to remain eligible for taper relief (latterly entrepreneurs' relief) so as to facilitate the most tax efficient outcome to the satisfaction of both the vendors and purchasers. Naturally we had delighted clients.