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In this instance the seller was the sole member of a CC that owned a productive farm. He wanted to know the Transfer Duty and CGT consequences of the sale. Payment to be made annually over a few years.

Whilst I would have advised the buyer to buy the business rather than the CC, there was a definite advantage to the seller in selling the membership of the CC.

I first disposed of the Transfer Duty with reference to whether the CC was a Residential Property Company as defined in the Transfer Duty Act.

s1 Transfer duty Act residential property excludes fixed property forming part of an enterprise as defined in the VAT Act, and that definition includes farming carried on continuously.

So, no Transfer Duty payable by the purchaser.

Next, the CGT.

Generally, the date of disposal for CGT purposes is the date of the conclusion of the agreement to sell, regardless of the “effective date” or the date of payment.

However, s24N (1) says that in the case of delayed payment for equity shares, CGT is only payable on each payment in the tax year that it arises provided that the purchaser is obliged to return the equity shares in the event of failure by the purchaser to pay any amount when due.

OK, now is membership in a CC included in the definition of equity shares?

s1 Income Tax Act:

equity share” means any share in a company

company” includes—

(f)       a close corporation

Good to go! CGT is only payable as the purchaser makes payments for the membership of the CC, provided the sale agreement is properly worded.


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