Ian's response tends to assume UK residential, but it would be nice to have confirmation
Yes, it's residential
For CGT you are disposing of the property at market value.
CGT is not a problem, it hasn't risen in value, it is on the market and there is currently no appetite to buy it at the same price as it was bought 8 years ago (hence the exploration of other options)
the 3% additional charge may also be in point
I have looked into this and yes it would. As I understand it the 3% is charged on all purchases through ltd companys (for transactions above 40K)
Your problem will be having no money to pay the CGT.
I would have thought the CGT would be a personal liability, rather than the company's (albeit zero given the lack of appreciation)
You will then have the running costs of the company every year
Yes this is a big downside which is decimating the operating profit in my cost analysis, I'm investigating the feasibility of doing the spade work myself, perhaps with the help of a professional for the first year. You're absolutely right though, this is one of the most unattractive parts of this approach.
There isn't really any good reason given why you would want to do this.
The main reason is to reduce the SDLT liability on another purchase which would be circa 3 times bigger than paying the 3% on the current property
There is also the efficiency of rental profits being taxed at corporation tax levels vs higher rate personal tax (I appreciate these profits would still have to be realised, but capital could be built up in the short term by repaying the loan)
Overall I tend to agree that it's a lot of hassle, but I'm exploring the options and I was interested to know how director's loans worked in practice, thanks to everyone for the responses so far.