Reply to: Moving away from the UK, withdrawing dividends and closing company

[Iliketax]

Just a final question please on my side - Leaving aside the Swiss tax system for the time being and concentrating on UK HMRC I understand you are saying that if I did sell shares from companyA to companyB it would be classed as income and not CG?

If that is the case then I do not understand your 10% / 20% point?

Yes, it's likely to be treated as income and not CGT.

The rate of tax is only relevant if you come back to the UK before the end of the temporary non-resident period (of five years).

[Iliketax]

That's a fairly easy one to answer, just consult the DTA.

No, it would be based on Swiss domestic law.

[NowPermOutsideUK]

Ah, I read your earlier post as saying that but misread the one I quoted as saying you were selling it for £1. I have no idea what the tax treatment is in Switzerland but from a UK perspective you wil not have a capital gain but income because of the transactions in securities rules. So if you were ever to come back to the UK while the temporary non-resident rules apply to you, you would pay tax at up to 38.1% not 10% or 20%.

Many thanks ILiketax - very helpful - And thank you eek for explaining that income tax to CG has been tried many times - I do realise that but I am in a very blessed position where I can take advantage of no CG in UK and swiss

Just a final question please on my side - Leaving aside the Swiss tax system for the time being and concentrating on UK HMRC I understand you are saying that if I did sell shares from companyA to companyB it would be classed as income and not CG?

If that is the case then I do not understand your 10% / 20% point?

Just to clarify :

1) I will not come back during five years (as I have already been here for three plus years and can hang around for the tax saving if needed) so temporary non-resident rules are not relevant.

2) If this is income then I am already a higher rate tax payer in UK due to some rental income in personal name so I obviously cannot pay higher rate tax and will instead keep the profits retained and pay myself salary and pension when I return to UK.

[Fred Bloggs]

So the great unknown is if HMRC regards it as income and not a capital gain how will the Swiss tax authorities see it? I suspect it would be seen as income

That's a fairly easy one to answer, just consult the DTA.

[eek]

I have no idea what the tax treatment is in Switzerland but from a UK perspective you wil not have a capital gain but income because of the transactions in securities rules. So if you were ever to come back to the UK while the temporary non-resident rules apply to you, you would pay tax at up to 38.1% not 10% or 20%.

So the great unknown is if HMRC regards it as income and not a capital gain how will the Swiss tax authorities see it? I suspect it would be seen as income

[Iliketax]

Im keen to understand Ramsay because that could be applied to anything and as I already asked about the well known tax dodge of moving personal property from personal name to Ltd to avoid S24 tax - That is happening up and down the country and yet it is purely for tax avoidance reasons. So far I have not had a satisfactory answer on why that is allowed if Ramsay holds true

If someone genuinely transfers property to a company and suffers the tax consequences of transfering property to a company then the Ramsay principle will not change that. The tax consequences of that would typically be (i) CGT on disposal (ii) SDLT on acquisition (on market value), (iii) corporation tax in the hands of the company, (iv) benefit in kind rules apply (if relevant), etc.

If instead you create an SCSp, transfer the beneficial interest in the property to the SCSp, admit the company as a member of the SCSp and makes a capital contribution to it, revalue the property, change the capital profit sharing ratios of the SCSp and then drawdown your revalued capital account then Ramsaywill be relevant. Probably not though as specific anti-avoidance legislation will tax it anyway.

As for your question about how it helps - Think about it for a minute :


1) I have £1 share which has a market value of £100 (for arguments sake).
2) I could take the money out as a dividend and therefore reduce the value of the share but I would have to pay tax in the foreign jurisdiction (UK does not charge divi tax or capital gains tax)
3) If however I sold the £1 share to CompanyB for £100 I have a capital gain which is neither taxed in the UK or Swiss. I then receive £100 from Company B for the share holding in CompanyA. Of course company B would have funds for this either in upfront cash or via a negative director loan

So it makes a very big difference on which way to play this as dividends are expensive and capital gains are tax free

Ah, I read your earlier post as saying that but misread the one I quoted as saying you were selling it for £1. I have no idea what the tax treatment is in Switzerland but from a UK perspective you wil not have a capital gain but income because of the transactions in securities rules. So if you were ever to come back to the UK while the temporary non-resident rules apply to you, you would pay tax at up to 38.1% not 10% or 20%.

[eek]

I m more interested in applying reasoning and logic to come to conclusions you see rather then fanciful thinking

That is why I gave you an example clearly of a disposal being done for tax avoidance which is encouraged

And when a contrived sale of shares is mentioned out comes ramsay and others with no thought process applied

But you didn't give a clear example - you gave an example that had zero relationship to what you are now trying to do.

Look we know you completely screwed up the purchasing of your properties (which clearly annoys you so much that you continuely refer back to property) but Iliketax has pointed you at am example that is a 100% identical version of what you are trying to do and you can see how HMRC will treat it - HMRC have spent 50 odd years removing every means possible of easily transforming income into capital gains. It's a game so old and closed down so often that's it's not surprising no one can help you anymore.

[NowPermOutsideUK]

Because life is unfair - deal with it.

I m more interested in applying reasoning and logic to come to conclusions you see rather then fanciful thinking

That is why I gave you an example clearly of a disposal being done for tax avoidance which is encouraged

And when a contrived sale of shares is mentioned out comes ramsay and others with no thought process applied

[eek]

Im not following you at all

I move property from MyName to CompanyA and that is fine because different entities

I move ownership of shares (by way of sale) of companyA from MyName to CompanyB and that is bad because what exactly ? Two different entities involved in this just like the property sale

Because life is unfair - deal with it.

[NowPermOutsideUK]

Aren't you missing something fundamental here. You aren't shifting the property to a LTD. You and Ltd are completely different entities. You are selling the house to the Ltd. It's a transaction between two unrelated (in law) parties.

I think by being so flippant about what happens is clouding the issue and that aside you are still comparing apples and pears.

Im not following you at all

I move property from MyName to CompanyA and that is fine because different entities

I move ownership of shares (by way of sale) of companyA from MyName to CompanyB and that is bad because what exactly ? Two different entities involved in this just like the property sale

[eek]

Fair enough - However in my scenario where I sell CompanyA shares to companyB both stamp duty at 0.5% and CGT are also levied. The only difference is CGT in both jurisdictions is zero and 0.5% is a lot less then what dividend tax would be

So are you turning full circle to say that if there is no commercial reason other then tax avoidance its all fine despite the ramsay principle?

It cannot be the case that shifting property from personal to Ltd for tax avoidance is fine but selling shares in companyA to companyB is completely wrong - Do you see my point?

But you control both companies - therefore they are the same in HMRC's eyes (third party entities with the same controller).

Which is different to transferring a property from personal ownership (one tax regime) to company ownership (a different tax regime).

[northernladuk]

Aren't you missing something fundamental here. You aren't shifting the property to a LTD. You and Ltd are completely different entities. You are selling the house to the Ltd. It's a transaction between two unrelated (in law) parties.

I think by being so flippant about what happens is clouding the issue and that aside you are still comparing apples and pears.

[NowPermOutsideUK]

Ramsey doesn't hold because stamp duty (and capital gains tax) is paid as the ownership of the property changes

Yes there are supposedly ways of avoiding both but neither have worked when HMRC comes asking.

Fair enough - However in my scenario where I sell CompanyA shares to companyB both stamp duty at 0.5% and CGT are also levied. The only difference is CGT in both jurisdictions is zero and 0.5% is a lot less then what dividend tax would be

So are you turning full circle to say that if there is no commercial reason other then tax avoidance its all fine despite the ramsay principle?

It cannot be the case that shifting property from personal to Ltd for tax avoidance is fine but selling shares in companyA to companyB is completely wrong - Do you see my point?

[eek]

Ramsey doesn't hold because stamp duty (and capital gains tax) is paid as the ownership of the property changes

Yes there are supposedly ways of avoiding both but none have worked when HMRC comes asking.

[NowPermOutsideUK]

Just sell it then. But how does that help you extract anything other than £1 in Switzerland.

Im keen to understand Ramsay because that could be applied to anything and as I already asked about the well known tax dodge of moving personal property from personal name to Ltd to avoid S24 tax - That is happening up and down the country and yet it is purely for tax avoidance reasons. So far I have not had a satisfactory answer on why that is allowed if Ramsay holds true

As for your question about how it helps - Think about it for a minute :


1) I have £1 share which has a market value of £100 (for arguments sake).
2) I could take the money out as a dividend and therefore reduce the value of the share but I would have to pay tax in the foreign jurisdiction (UK does not charge divi tax or capital gains tax)
3) If however I sold the £1 share to CompanyB for £100 I have a capital gain which is neither taxed in the UK or Swiss. I then receive £100 from Company B for the share holding in CompanyA. Of course company B would have funds for this either in upfront cash or via a negative director loan

So it makes a very big difference on which way to play this as dividends are expensive and capital gains are tax free