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Andrew Duncan
Assets owned by a Trust escape the consequences of taxation that otherwise apply on death of an owner. On the death of a natural person, Estate Duty at the rate of 20% on the market value of the property would be payable , together with C GT on the profit since purchased ( or as of October 2001) at a rate of not more than 10%.
The same applies if the property is purchased through a company or close corporation and the shares are held by an individual. The appreciating value of the property translates to the value of the shares or interests held.
If the corporate entity disposes of the property, the CGT consequences are onerous in that the rate of 14% applies, together with STC of a further 10%, resulting in a total tax charge of approximately 22%.
If the shares/interests in the property owning company/close corporation are disposed of, the CGT rate is lessened to 10% but against a base cost of the share issue price which will often equate to a similar CGT to the entity selling the property.
Trusts bring a greater flexibility in that if the property is sold, the capital gain can be distributed to an individual Beneficiary so that the rate does not exceed 10%.
Alternatively, at worst, if retained in the Trust, the rate would amount to 20% which is still less than if held via a company/close corporation. The moral being to put your trust in Trusts when investing! |
