A company can pass a property to its shareholders by selling it to them, by paying a dividend in specie, or by distributing it in a liquidation. Whichever route is used, the company is taxed on a chargeable gain worked out at market value, so the corporation tax is broadly the same. What changes is how the shareholder is taxed (income tax on a distribution, or capital gains tax in a winding up) and whether SDLT is due, which depends on what the shareholder pays or takes on.

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What does the company pay, whichever route is used?

A transfer to a shareholder is not a bargain at arm’s length, and a distribution of assets by a company to its shareholders is one of the cases HMRC lists at CG14530 where sections 17 and 18 of the Taxation of Chargeable Gains Act 1992 replace the actual price with market value. The company therefore makes a chargeable gain of market value less its base cost, even if it receives nothing. Indexation allowance is still available to companies but is frozen at December 2017.

The gain is taxed with the company’s other profits. For the financial year beginning 1 April 2026 the small profits rate is 19% for profits under £50,000, the main rate is 25% above £250,000, and marginal relief applies in between. The same market value becomes the shareholder’s base cost for any later disposal.

Valuation is the point HMRC is most likely to question. CTM15330 says the Valuation Office will advise where UK property is transferred to or from a company and gives rise to a distribution, and CTM15250 warns that the value can depend on the interest transferred: if the member already holds a tenancy, that affects the value of the freehold, but a lease granted to the member followed by a sale of the encumbered freehold is valued as the unencumbered whole.

What happens if the shareholder buys the property?

At full market value, a sale is simply a disposal by the company. There is no distribution, and the shareholder pays SDLT on the price as any buyer would, including the higher rates for additional dwellings if they already own a home. Paying by crediting the price to the director’s loan account is still consideration; see director’s loan accounts explained.

At an undervalue, CTM15250 explains that the excess of market value over what the member gives is a distribution under section 1000(1)B or G of the Corporation Tax Act 2010, taxed on the shareholder as dividend income. If the shareholder is also a director or employee, CTM15290 says the charge depends on the capacity in which the asset was received: employment income if it flows from the office or employment, a distribution if received as a member.

For SDLT, the deemed market value rule in section 53 of the Finance Act 2003 applies only where the purchaser is a company. When a company sells to an individual, SDLT is charged on the actual consideration, so an undervalue sale gives a lower SDLT figure but a larger distribution.

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How does a dividend in specie work?

The company declares a dividend and satisfies it by transferring the property. It must have profits available for distribution under section 830 of the Companies Act 2006, and section 845 fixes the amount of a distribution of a non cash asset by reference to its book value. The company law and accounting side is covered in dividends in specie.

For tax, CTM15200 says a dividend in specie is usually declared at a stated amount, commonly book value, and the dividend equals that amount; if market value is greater, the excess is a further distribution under CTM15250. In practice the shareholder is taxed on the full market value as dividend income. For 2026 to 2027 the rates above the £500 dividend allowance are 10.75%, 35.75% and 39.35%. There is no cash to pay the tax, which is the main practical drawback; see how shareholders are taxed on dividends in specie.

What changes if the company is liquidated?

Once a company is being wound up, section 1030 of the Corporation Tax Act 2010 provides that a distribution in respect of share capital is not a distribution for corporation tax purposes. HMRC confirms at CTM36130 that the normal pro rata distribution of net assets to shareholders in a winding up, even if they include accumulated profits, is instead a capital distribution under section 122 of the Taxation of Chargeable Gains Act 1992. The liquidator can transfer the property itself, and the shareholder is treated as disposing of their shares for its market value.

For 2026 to 2027, capital gains tax is 18% within the basic rate band and 24% above it, after the £3,000 annual exempt amount. A members’ voluntary liquidation requires the directors to declare the company solvent; see members’ voluntary liquidation.

The company winding up targeted anti avoidance rule in section 396B of the Income Tax (Trading and Other Income) Act 2005 can turn a winding up distribution back into income. HMRC’s summary at CTM36305 lists four conditions, all of which must be met: at least a 5% interest; a close company in the two years before the winding up; the individual continuing to carry on, or be involved with, the same or a similar activity within two years; and a main purpose of avoiding or reducing income tax. Shareholders who plan to keep letting property through a new company should consider it carefully; see the targeted anti avoidance rule on liquidations.

When is SDLT payable on the transfer?

Under paragraph 1 of Schedule 3 to the Finance Act 2003, a transaction is exempt from SDLT if there is no chargeable consideration. A dividend in specie or a liquidation distribution of an unmortgaged property is normally in that position, because the shareholder gives nothing in return.

A mortgage changes that. Under paragraph 8 of Schedule 4, the assumption of an existing debt is chargeable consideration, and HMRC explains at SDLTM04040 that this covers giving a personal covenant, releasing the transferor from its covenant, or indemnifying it. A shareholder who takes over the company’s mortgage pays SDLT on the debt assumed, and if the property is a dwelling and they own another, the higher rates can apply where the consideration is £40,000 or more. See SDLT higher rates for additional dwellings.

How do the three routes compare?

Route Company Shareholder SDLT
Sale at market value Gain at market value No tax on receipt; pays the price On the price
Sale at undervalue Gain at market value Distribution (or employment income) on the shortfall On the price actually paid
Dividend in specie Gain at market value Income tax on market value at dividend rates None unless debt is assumed
Liquidation distribution Gain at market value Capital gains tax on the capital distribution, subject to the TAAR None unless debt is assumed

How might the numbers look?

Illustration only. A company owns one buy to let flat, bought for £100,000 and now worth £160,000, with no mortgage. It also holds £11,400 in cash and has no other assets or liabilities. Its sole shareholder subscribed £100 for the shares, already earns enough to use the basic rate band, and owns their own home.

  • Company: on any of the routes, a gain of £60,000 before indexation. If taxed at the 19% small profits rate, the corporation tax is £11,400, which uses up the cash. Ignoring costs, the flat itself is what is left for the shareholder.
  • Dividend in specie of the flat: the shareholder is taxed on £160,000 of dividend income, mostly at 35.75% and 39.35%, and receives no cash from the company to pay that tax.
  • Liquidation: the liquidator pays the corporation tax from the cash and distributes the flat. On a capital distribution of £160,000, the gain is £159,900; after the £3,000 exemption, tax at 24% on £156,900 is £37,656, unless the TAAR applies.
  • SDLT: nil on either distribution because no debt is assumed. Had the shareholder taken over a £90,000 mortgage, SDLT at the higher rates would be 5% of £90,000, or £4,500.

What mistakes come up most often?

  • Assuming that because no money changes hands there is no corporation tax; the market value rule applies.
  • Declaring a dividend in specie at book value without enough distributable profits, or without recognising that the shareholder is taxed on the full market value.
  • Overlooking that a shareholder who takes over the mortgage gives chargeable consideration, bringing SDLT and possibly the higher rates into play.
  • Relying on a cheap transfer price to cut SDLT, which simply increases the distribution taxed on the shareholder.
  • Liquidating and then carrying on the same letting activity through a new company without considering section 396B.

For other ways to draw value from a property company while it keeps the property, see getting money out of a property company.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.