Looks like the stamp duty holiday extends to June. I am thinking setting up limited company to buy one.
My questions are:
Does my newly formed limited company treat like first time buyer? If it buys its first house and value less than 500k, does it mean no stamp duty during this holiday period?
Does company still need to pay 3% surcharge?
Will company need to pay 3% surcharge for the second property?
Will it affect my person residential, eg I only have my own home and my limited company, if I sell my own home and purchase a new home, will I need to pay the 3% surcharge?
I appreciate anyone has the experience of this helping answering it. Also could you private message me if you can recommend some reliable accountant and mortgage broker for limited company you know of? Many thanks.
Replace main residential, if you have second property, you still need to pay surcharge. Question 4 is about if I have main home and limited company has property, if I replace my main residential home, will I need to pay surcharge? Will the limited company treat me I have second property already or not?
No because the company is a separate legal entity.
But you don’t pay the surcharge anyway if you replace your main residence…
Blockquote
If you’re replacing your main residence
You will not pay the extra 3% SDLT if the property you’re buying is replacing your main residence and that has already been sold.
If you have not sold your main residence on the day you complete your new purchase you’ll have to pay higher rates. This is because you own 2 properties.
You can apply for a refund if you sell your previous main home within 36 months.
The company is never counted as a first time buyer because the property has to be bought to be your main residence, which is impossible for a limited company…
Blockquote
A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence
Hi, sorry to jump in - but my family have an unencumbered property in London that is valued under £500k, therefore exempt from Stamp Duty. I am thinking of re-registering it under a Ltd company, my father and I as directors, then remortgage the property and put the funds into the Ltd company. The property already has an AST - so is it better the tenant (through an AST appendum), pays his rent into the Ltd co bank account or just keeps his rent payments to a private current account as it currently is? Just want to know, the benefits - i.e. swerve inheritance tax, etc… The funds extracted, could be used an investment vehicle for other properties, assets etc… Will like to hear your views. Thanks.
It’d only be exempt from normal stamp duty until the end of the holiday. The company would still pay the 3% surcharge regardless.
Also, it would have to go in at market value, which would crystallise any capital gains, so you could end up with CGT to pay. The company would then owe you the money for it.
You’d have to have a company bank account.
It could be marginally better, potentially, for inheritance tax (easier to pass on piecemeal if you want to and the value is potentially less because of the capital gains tax that the company would have to pay), but if you own the property personally and die, there may be IHT payable but the CGT clock resets - ie your cost for CGT becomes the probate value. If it’s in a company, the company shares reset in value for CGT, but the property itself in the company still has the original base cost.
When you say “exempt from normal stamp duty” and “the company would still pay the 3% regardless” - can you elaborate on that please (sorry to be thick), but you have an interesting point which i am not understanding.
The current lender has an index value of under £500k. The property was purchased c.£90k in the early 1990’s - there would be a capital gain, what do you mean by “the company would then owe you the money for it?”
I don’t own the property personally, my father does. I was thinking the Ltd co route because it only carries the CGT not CGT+IHT. Thoughts? What do you mean by the “company shares reset in value for CGT” and “the property itself in the company still has the original base cost”?
Thanks!
You are getting to the depth where you need to talk to an accountant, but:
1 Exactly what I said. The company would still have to pay the 3% second home surcharge (even if it’s the first property).
2 Your father would be paying capital gains tax on around ÂŁ400k, mostly at 28% (today, may be different come Wednesday). The company would owe him the ÂŁ500k for the property (unless he gifted it, but the CGT would be based on ÂŁ500k anyway).
3 The company will have a cost of £500k for the property. If it sells it when it’s worth £600k, it would have CGT to pay on £100,000 (currently at 19%).
If your father dies owning the property worth £600k, there would be IHT on the £600k (subject to allowances). You’d inherit it with a CGT cost of £600k, so if you sold it for £600k at that point, there would be no CGT to pay.
If he died owning the company shares, you’d inherit the shares (probably worth about £580k assuming any money repaid to him is still in the estate, and including that), but the company would still owe CGT on £100k if it sold the property.
There are fancy schemes out there that involve trusts if you go to a specialist tax adviser, but they don’t come cheap!