This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

BICT

MarkKnight
Posts:3
Joined:Thu Dec 05, 2019 7:00 pm
BICT

Postby MarkKnight » Thu Dec 05, 2019 7:06 pm

Hi, I am hoping for some guidance.

I own, with mortgages 3 HMO's. I own another HMO in a ltd company. I am a higher rate tax payer.

My long term plan is to sell these and buy flats.

My initial thoughts were to just sell as is and pay the CGT where applicable.

Or, is there another way? The profit from the 3 in my name would be circ 350k and 120k for the one in the company.

Could I use BICT. Sell the properties and use the proceeds to immediately buy more properties?

What are your thoughts?

Thanks

Mark

AnthonyR
Posts:321
Joined:Wed Feb 08, 2017 2:33 pm

Re: BICT

Postby AnthonyR » Mon Dec 09, 2019 3:14 pm

If you sell them, you pay CGT and if you then acquire flats then you'll have an SDLT charge on the purchases. Is that going to put you in a better position than just holding the HMOs (I appreciate it's not all about the finances and HMOs are hard work)?

Transferring the properties into a company would likely trigger:
1. A CGT charge (unless you can demonstrate that you are running a business - 3 HMOs is unlikely to be a business from a caselaw point of view unless you do a huge amount of work on them) and
2. An SDLT charge on the market value of the properties (unless you can demonstrate that you are running a partnership)

The question of transferring via a BICT (Beneficial Interest Company Trust) is a controversial one from a legal point of view (less so from a tax point of view I believe) and avoids you having to remortgage at the point of transfer, but isn't likely to save you from the above points unless your circumstances are right.

The question is whether the tax hit on sale will be beneficial overall in terms of income any/or quality of life. I'd suggest talking to an adviser who deals with property tax regularly to assess your circumstances.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk


Return to “Property Taxation”