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Where Taxpayers and Advisers Meet

incorporating my properties into limited company

maysantech
Posts: 6
Joined: Tue Feb 24, 2015 6:37 pm

incorporating my properties into limited company

Postby maysantech » Tue Jun 11, 2019 8:03 pm

apology if I am posting this topic in the wrong forum
I owned 5 buy to let properties, all on BTL mortgage and my wife owns 4 properties out right (no mortgage on them) I have full time employment and my wife does not work. Her only income is from the let properties. We both heavily involved in running the properties, we do not hire estate agent and we do most of the repairs, advertising, cleaning viewing, letting etc. in another words we spend more than 20 hours each running the properties.
Can someone please put us in the right direction on how we can incorporate our properties in a limited company which we will be both the directing managers for without incurring the usual CGT and stamp duties.

bd6759
Posts: 3072
Joined: Sat Feb 01, 2014 3:26 pm

Re: incorporating my properties into limited company

Postby bd6759 » Tue Jun 11, 2019 10:43 pm

Incorporation relief is a possibility for CGT, but difficult to get. It also means you get shares for the value of your assets rather than cash.

Can't think of any way to avoid SDLT, but MDR may be claimable to reduce the bill.

This shouldn't be a "do it yourself" transaction.

AdamS93
Posts: 220
Joined: Tue Sep 26, 2017 6:28 pm

Re: incorporating my properties into limited company

Postby AdamS93 » Wed Jun 12, 2019 11:34 am

I have never seen incorporation relief claims for just 5 properties...

It would be a waste of time (and money) incorporating your wife's properties in my opinion.

It is possible to get around SDLT but I think CGT will be far harder to avoid.

You also have the problem of transferring the mortgages to the limited company. How easy this can be done will depend on how cooperative your lender is.

GlobalTaxAdviser
Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: incorporating my properties into limited company

Postby GlobalTaxAdviser » Wed Jun 12, 2019 2:43 pm

Definitely worth considering for 9 properties under a Limited Company. Though you need to carry out some number crunching first if there are going to be significant tax gains in the long term. One caveat is the profit on your wife properties maybe covered by her personal allowance so may not be any advantage

You mention 20 hours aka Ramsay case but I think you meant 20 hours in total for you and your wife. I don't think you would would get incorporation relief for just 5 properties and this maybe where everything falls down. I would be careful there are specialist companies that charge vast fees and claim incorporation relief is available when technically this may not be the case. There used to be Non-statutory clearances available from HMRC but they have withdrawn this now.
SDLT exemption is possible if you are a partnership.

If you are looking to reduce tax and you are a high rate tax payer then you can look into transfer of beneficial interest.

maysantech
Posts: 6
Joined: Tue Feb 24, 2015 6:37 pm

Re: incorporating my properties into limited company

Postby maysantech » Wed Jun 12, 2019 7:25 pm

many thanks for your input guys
one of the reason we would like to do it is that I am higher rate tax payer. And the latest tax changes related to let properties would make my situation even worse.
we are spending on average 20 hours each a week to run the properties. one of them is HMO, and two are in different location where we live (about 200 miles). it normally takes me couple of days on average to visit the properties for whatever reasons. if there is work involved then I stay between 3-10 days on average and this is happening at least once a year
I understand this is not a DIY practise, but I need to have an idea what I am talking about when I approach tax and accountancy firms. As it has been said, there are firms out there who promise you the earth but how much of it is true is hard to tell.

is it worth writing to HMRC?
how to get into partnership? we are effectively running the properties jointly. can this be classifies as partnership?
what is "transfer of beneficial interest"?
is there any firm who can do an initial assessment whether it can be done or not?

GlobalTaxAdviser
Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: incorporating my properties into limited company

Postby GlobalTaxAdviser » Wed Jun 12, 2019 11:20 pm

is it worth writing to HMRC?
No, as like I mentioned you could have completed a form until last year
how to get into partnership? we are effectively running the properties jointly. can this be classifies as partnership?
Possibly but see definition " Partnership is the relation which subsists between persons carrying on a business in common with a view of profit"

Though I have seen other accountants claim it needs to be formal setup

what is "transfer of beneficial interest"?
The beneficial interest is an interest in the economic benefit of a property. In this case you would transfer say 99% of the property to your wife through a declaration of Trust. This may not work depending if you can transfer the mortgage which the lender may not agree. If they agree SDLT may apply
is there any firm who can do an initial assessment whether it can be done or not?
Most accountancy firms will say yes it can be done as they want your business. Admittedly its such a grey area when transferring properties in a limited company especially when we discuss incorporation relief and remortgaging. Though if it is possible even accounting for the initial fees the savings can be significant due to for lower tax rates (will fall to 17% in 2020) and the fact you are paying 40% on rental profits and mortgage tax relief restrictions. The key is getting the incorporation relief but still unsure you each separately could justify it as a "business" under the Ramsay case. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65715

While not as beneficial as incorporating a company. Possibly you could also consider forming a company owned by your wife who would invoice you for managing your properties based on a % of the Rental fee.


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