Property Aspects in the Manufacturing Sector

Do you own, or are you considering acquiring commercial property from which to run your business?

Have you considered, or been advised on, the ownership structure of the property and the various taxation and commercial considerations thereof?

Often, companies see the property they wish to acquire, appoint a solicitor and off they go. By default therefore, the trading company owns the property. However, it really does need some detailed thought.

Who should own the property?

Well, it is not necessarily the trading company. Other vehicles are:

• the shareholder(s) personally
• another company, either separate or part of the group
• a pension scheme

Each vehicle has very different taxation and commercial considerations.

What are the taxation considerations?

You need to consider:

• corporation tax
• capital gains tax
• stamp duty land tax
• inheritance tax

The various combinations of the above, depending on the ownership structure, can give very different outcomes. Get it wrong and it can cost a lot of tax. Alternatively you could engineer a very favourable tax outcome, particularly using pension schemes. The effects will also be different depending on whether the property already sits on the company balance sheet.

What are the commercial considerations?

You need to consider:

• ring fencing (i.e. protecting the valuable safe assets from potential creditors of the more risky manufacturing business)
• the future plans for the property and potential sale (who should benefit from capital uplift?)
• the future plans for the company (for example one may wish for the company to be sold but for the property to be retained as a source of retirement income)
• funding

What do you need to do?

Seek advice from your accountant or us, before you enter into a transaction.

Even if you have ‘made your bed’, you do not necessarily have to lie in it. Undertake a review and seek advice for a potential restructure.