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Where Taxpayers and Advisers Meet

Transferring some properties to a limited company

deanh
Posts: 45
Joined: Wed Aug 06, 2008 3:32 pm

Transferring some properties to a limited company

Postby deanh » Mon Sep 14, 2020 4:38 pm

Hi, I had a question on the transfer of residential BTL properties that I hold, to a newly set up limited company. The 3 properties are valued in total at c.£200k and all mortgage free.

I was looking to take advantage of a free draw down against a director's loan account but my accountant advised that I might not be able to do that as a Share Premium account would need to be set up, and would stop me from drawing down rental profits tax free against a £200k director's loan account. I just wondered whether anyone has any experience on this and if my accountant's advise is indeed correct.

Dean

bd6759
Posts: 3252
Joined: Sat Feb 01, 2014 3:26 pm

Re: Transferring some properties to a limited company

Postby bd6759 » Mon Sep 14, 2020 6:41 pm

A share premium account is where you pay more for shares than their nominal value. For example, the company gives you 100 £1 shares in exchange for your property portfolio. If that happens, you have no director’s loan, but you have 100 shares worth ostensibly £200k.

If you sell your properties to the company for 200k, the company will owe you that amount. That is the directors loan. It is a debt from the company to you. The company repays the debt over time when it has the funds.

The company will need to pay 3% SDLT on the purchase.

You will be liable to CGT on the sale.

AdamS93
Posts: 260
Joined: Tue Sep 26, 2017 6:28 pm

Re: Transferring some properties to a limited company

Postby AdamS93 » Mon Sep 14, 2020 9:26 pm

Your accountant is referring to incorporation relief to avoid the CGT on transfer.

I would suggest that 3 BTL’s would struggle to qualify for incorporation relief in the first place.

As mentioned above, the company would pay 3% SDLT and you would pay CGT on the sale.

deanh
Posts: 45
Joined: Wed Aug 06, 2008 3:32 pm

Re: Transferring some properties to a limited company

Postby deanh » Tue Sep 15, 2020 9:16 am

Thank you to both of you for your clear responses. I assume that the additional 4% charge will also be applicable in addition to LBTT or SDLT?

bd6759
Posts: 3252
Joined: Sat Feb 01, 2014 3:26 pm

Re: Transferring some properties to a limited company

Postby bd6759 » Tue Sep 15, 2020 9:26 pm

Yes, but that depends on when this happens and the value of each property. The increased COVID nil rate will apply at the moment.


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