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Feb 25, 2008:
A recent amendment to the Companies Act (1973) could help eliminate one of the loopholes in the current tax structure, that previously enabled buyers to avoid paying transfer duty by taking ownership of a property through a company.
A recent amendment to the Companies Act (1973) could help eliminate one of the loopholes in the current tax structure, says Tony Clarke, MD of Rawson Properties.
Up to now, says Clarke, if buyers were thinking of avoiding paying transfer duty by taking ownership of a property through a company, this might have been feasible – but the new amendment will make it impossible.
The amendment specifies that when a company's shareholders authorise their directors to dispose of the majority of the company's assets (or the bulk of its business), a special resolution has to be registered with the Registrar of Companies within 30 days of the resolution being passed. This, says Clarke, will increase the likelihood of the Receiver of Revenue realising that what appears to be simply a share transfer is, in fact, a bona fide property sale - particularly where the company has no or few other assets.
The amendment was effective from and including 14 December 2007 and is not applicable to Close Corporations.
In the past, says Clarke, non-trading companies with only properties as assets, could possibly have been sold without the Receiver of Revenue being aware of exactly what the deal comprised, despite the fact that the Transfer Duty Act had previously been amended to ensure the payment of Transfer Duty on such sales.
"At Rawson Properties we fully support the amendment and the tightening up in this field which, it has to be admitted, is long overdue," said Clarke.
