A and B own a commercial building which for sound personal reasons they wish to transfer to their company. The building’s value is £1m, which the company will be to A and B.

They wish to transfer it to the company over four tax years namely January and April 2018 and Aprils 2019/20.

By transferring the building in quarter shares in this way, they will have eight annual CGT exemptions which will go a long way towards covering their capital gains.

Bearing in mind that the clients control both sides of the transaction, and are not bound to implement the second, third or fourth transfers each of a quarter share of the building, is stamp duty payable on each occasion on £250,000, or is it calculated on the full £1m? If the latter, at what point would it be payable?

Beverley S. Warrington

I fear you are looking at £1m in total - s.108 FA 2003 (Linked Transactions):

(1) Transactions are “linked” for the purposes of this Part if they form part of a single scheme, arrangement or series of transactions between the same vendor and purchaser or, in either case, persons connected with them.

You could argue that the transactions are independent but that would be “brave”. Arrangements do not have to be legally binding and include a series of transactions (see SDLTM30100 for more). It is clear here that the transactions are intimately connected, all relating to the exact same property, and the purpose is to reduce the tax rate.

I believe you would pay the tax on step 1 as a transfer of £250,000 but then later steps would take into account earlier steps when calculating the rate.

Andrew Goodman
Osborne Clarke LLP