‘Lifestyle assets’ owned by companies

Recent Government announcements bring under the spotlight the issue of private companies which own so-called ‘life-style’ assets, for example cars, boats and real estate. To date no draft legislation has been issued with only a press release and Treasury Consultation Paper having been issued.

The Government is proposing tightening up the ‘deemed dividend’ rules, particularly in circumstances where there is usage of company property for free or at less than arm’s length value. The deemed dividend amount will be the value that would have normally been paid by parties dealing with each other at arms-length, less any amount that has actually been paid by the shareholder or associate for that use.

The proposed changes highlight the need to carefully consider what assets are held by companies, the terms of use by the company’s shareholders, and whether any ‘deemed dividend’ issues may arise.

Frequently any adverse taxation consequences could be avoided by having in place appropriately documented terms of use for any relevant assets. In certain circumstances it might also be necessary to revisit and restructure how particular assets are held.

If you believe your private company may be affected by these measures, we suggest you contact us .