Limited Company as a Beneficiary

About a year ago a question was posed as to whether a limited company could be a beneficiary in the context of a deed of variation, with the replies being in the affirmative.

On a similar point, if X dies leaving his property (half share) into a discretionary trust presumably the trustees could gift the property to New Co Ltd. The advantage being that the intended beneficiary would prefer the property to be held under a limited company structure than personally. (If he receives personally, then he would need to sell to the limited company which would trigger stamp duty.)

To complicate matters the beneficiary owns half the property personally, and therefore if the trustees gift their share in the property to New Co Ltd, the legal title would be with beneficiary but as to one half for himself and one half for New Co Ltd. Is this doable, or is there something obvious that I am missing?

Haroon Rashid
I Will Solicitors Ltd

Unless New Co Ltd is an object of the discretionary trust, I wonder what powers the trustees might have to “gift” the property to it.

If the trustees are able to validly assign their interest in the property to the company, I can see no legal reason why the surviving trustee of land cannot hold upon trust for themselves and the company.

There may, of course, be tax complications, mindful amongst other matters that the company is probably a close company.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

Thanks for this @paul . The class of beneficiaries is wide enough to include New Co Ltd, (with two beneficiaries having the power to add to the class of beneficiaries), and therefore the ‘assignment’ should be possible. As it is a full discretionary trust Will, and we are within two years of death, then it is as if the testator had given the property direct to the limited company. I have never come across this before, and it would be interesting to know if other practitioners have done so?

Often a limited company is seen as a useful vehicle from which to use to own a company, so why leave property to a beneficiary when you can leave to either an existing company, or a new co, with the beneficiary as the shareholder.

Haroon Rashid
I Will Solicitors Ltd

Hi Haroon

You cannot gift to a Limited Company - any gift becomes a loan on the balance sheet.
If you ‘gift’ a property to a Ltd and then forgive the loan you will probably incur a corporation tax charge as the balance sheet would show a “+” and no loan to offset the profit.
I’d suggest there will be SDLT to pay on the transfer as HMRC will consider this to be at market value and CGT.

All cases are different, I see 20 clients a year who have done this incorrectly :0)