How can I move my production asset owning company into a trust without paying CGT?
Last month I talked about moving a service company into a trust. If the company owns assets, such as plant and machinery, then it gets a bit more complicated.
The principal is basically the same. You register a new company and issue the shares to your trust. Then you start invoicing from the new company (increasing its value), but continue paying the bulk of the expenses in the old one (reducing its value).
The old company rents the assets to the new company, and here you can play around with rentals to balance the profits and expenses to the best advantage.
The assets get depreciated down to a book value of zero (usually 5 to 6 years, some of which have already passed). They can then be donated to the new company without attracting Donations Tax or CGT.
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Would the depreciated assets not have to be valued at market value for Donations or CG tax? They may well be worth nothing from a business accounting point of view, however does SARS accept this?
Hi Regine,
If SARS’ Wear and Tear allowances have been applied, then it is SARS that have determined the market value and I have no doubt that they would accept their own valuation, that is, the value after Wear and Tear has been deducted.