Tax implications of selling part of freehold to developers

Discussion in 'Property Tax and Accounting' started by SteveC5353, Oct 16, 2018.

  1. SteveC5353

    SteveC5353 New Member

    I own a flat that's in a block of 12 flats, and the management company that runs the flats bought the freehold 15 years ago for £20k. We've recently had an offer from a developer to buy a part of the land for £500k. Can anyone offer advice as to whether the management company will need to pay corporation tax on the sale, and if the money is distributed to each flat owner, will they be liable to capital gains tax as well?
  2. diyhelp

    diyhelp Active Member

    Do you own the management company?

    I’m also a little confused about the suggestion that each flat owner would receive a payment? Is this in relation to shared land? Have they agreed to sell their flats? If a company sells an asset for profit then they would expect to pay corporation tax.
  3. SteveC5353

    SteveC5353 New Member

    The management company is run by "us", i.e. the flat owners, and the land that we're looking to sell is currently amenity space that all flat owners can use. All flat owners have agreed to the sale of this piece of land, so none of the flat owners need to sell their flats.
  4. diyhelp

    diyhelp Active Member

    Legally a company and individuals are two very different entities. I would take advice from an accountant but unless a “shareholder” withdrew funds from the company this would not necessarily trigger a capital transaction or a tax bill for any individuals.
  5. realdeals

    realdeals Active Member

    I think it is important to appreciate the difference between the taxation situation for an individual and a company. The company is a totally separate legal entity under UK law. It is only when shareholders sell any of their shares that they themselves create a taxable action for their individual tax situation. Income and capital gains will be treated under corporate tax law for a company.
  6. Longterminvestor

    Longterminvestor Administrator

    If you are unsure take advice from an accountant. However, as has been touched on above, a company is considered a totally separate legal entity to its shareholders. So, if the land is sold from the company then this would be a potentially chargeable event for the company not shareholders.

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