This worked example is for illustrative purposes only.
Example:
A transfers a residential property to company B, for consideration of £170,000.
Chargeable consideration and tax payable where A is not connected with company B
A is not connected with company B in accordance with section 1122 of the Corporation Tax Act 2010. The chargeable consideration is therefore the amount paid, in this case £170,000. The total tax payable is £500 using the current residential rates and bands. If the chargeable consideration was nil, this would be an exempt transaction under Paragraph 1, Schedule 1
Chargeable consideration and tax payable where A is connected with company B
A is connected with company B in accordance with section 1122 of the Corporation Tax Act 2010.
The chargeable consideration for the transaction is the higher of the market value of the property at the effective date of the transaction and the chargeable consideration given.
Therefore it is important to know the market value of the property.
If the market value was £275,000 this would be the amount of the chargeable consideration as it is higher than the amount paid (£170,000). This would also be the case if the chargeable consideration given was nil as Paragraph 1 of Schedule 1 (no chargeable consideration) is disapplied by Section 22(4) and is therefore not an exempt transaction.
Based on a chargeable consideration value of £275,000, the total tax payable is £3350 using the current residential rates and bands.
If, however, the market value was £150,000, the chargeable consideration would be £170,000 as it is higher than the market value. Based on a chargeable consideration value of £170,000, the total tax payable is £500 using the current residential rates and bands.
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