I was considering selling my current home to my limited company as it maybe more tax efficient. E.G only paying 20% tax vs 40% income tax. I suspect it won’t be worth my time as I will have to pay stamp duty.
I read online “if you can prove that your property portfolio is your business, then you can incorporate your business, which includes transferring into the limited company your properties without paying SDLT. Obviously, you need to jump through hoops but it is possible.”
Then I asked CoPilot (AI)
You’re correct! If you can demonstrate that your property portfolio is indeed a business and not just a passive investment, you may be eligible for Incorporation Relief. This relief allows you to transfer your properties into a limited company in exchange for shares, deferring Capital Gains Tax (CGT) until you sell those shares.
However, it’s important to note that Stamp Duty Land Tax (SDLT) is generally still payable unless the transfer involves a partnership. The key is to show that your property activities are substantial and active enough to qualify as a business
Well technically I don’t live in it anymore I have moved back to my parents. I only own the one property and it is on a BTL mortgage. I have plans to release some equity and buy another property and live in that other property.
My understanding is that its not usually worth transferring property to a limited company as you lose too much in sales and purchase taxes to offset the benefits. It was because of this that some firms of accountants came up with clever hybrid schemes involving companies, LLPs and critically, personal ownership. However, HMRC recently ruled that this is tax avoidance and they are coming after those landlords to repay years of back tax and fines.
I believe that to get CGT relief on the sale, you’d have to show that you are currently running a business, not just that you intend to. Do you have a large portfolio? Are you currently paying NI on the income?
I’m not a tax expert by any means, so I would suggest you post the same query on the Propertytribes forum as they are more geared to investment and tax and have at least one specialist who posts regularly.
It depends on having a number of properties. If you only have 1 or two you it is unlikely HMRC would allow it and you may end up with a massive tax bill. You definitely need expert advice on this.
It also depends on being able to show you spend on average at least 20 hours a week.
My understanding too is that you have to set up a partnership first and that this needs to run for at least a couple of years.
contact Property 118, Cotswolds Barristers - they are the experts in this domain. Not cheap tho. Best yet login to their chats or get on their daily newsletters the articles are very informative and put this question on their platform to get free advice up front. Yes if can be done but as ever the greedy landlord hating Government is attacking this legal tax scheme.
Property 118 operated one of the hybrid schemes that HMRC are now saying was tax avoidance and my understanding is that their clients could now face a very big bill.
Correct but the are Barristers & they are fighting this challenge from the money grabbing HMRC. 118 are adamant that their structures are fully compliant with the law. But yet it’s a risk right now
Susan, I dont beleive that this was a question of an unfair or “money grabbing” judgement by HMRC. I spoke to several well respected firms of tax specialists about these schemes several years ago and it was clear to them that this would happen as the schemes were dodgy. I dont expect Property 118 to win so if youve been a part of one of these schemes, I suggest you get some independent legal advice.
I think David’s “deal” is that you have recommended them here as “experts” who are apparently fighting a legal battle with HMRC over advice they have previously given clients. Whether you need them or not is irrelevant to the fact that you are now recommending a course of action to others which could turn out to be illegal depending on the ruling.
Claiming that public services in this country aren’t what they used to be while also claiming that HMRC are “money grabbing” seems contradictory. Not that you are doing that, of course.
No Tate- san I stated very clearly they are being challenged on their structures so it’s a risk. And someone could end up with egg on their face if 118 wins the legal challenge. I think we are all very clear on this forum that “Public Services” in UK are appauling - Councils - Licensing, HRMC out to keep people poor whilst HM is raking it in using public taxes. Not every country operates with such inefficiency I can assure you because I spent most of my life living in such a jurisdiction which runs a surplus each year, taxes are low, no IHT, no tax on asset sales, no managing Agents as they are not needed. No regulations that renters need to comply with, Gas Co comes periodically checks the gas, no fee! should I go on? No councils and no VAT. Anyhow we digress from the OP who is probably laughing at our bickering.
