Singing Pig

Hi all

I have two flats which I currently let out, and am interested in transferring them to a limited company (which I would create and be owner of), particularly as I gather the tax situation is more favourable.

Can anyone tell me what is actually involved in doing this? I assume the process is to actually sell the property to the company, which I guess would mean I have to pay capital gains tax.

Any help or guidance would be greatly appreciated.

Thanks

Joe

Hi Joe.

You'll also need to allow for Stamp Duty and legal costs.  Also the Ltd Co will need to raise funds to buy the properties (either a director's loan from you, or mortgage in name of Ltd Co, etc.).

Ltd Co is not generally cheaper for BTL properties.  It's better suited to BTS, and perhaps when you have a large BTL portfolio (50 or more properties).

Ltd Co is also useful if you are trying to shield your assets from other greedy parteis (eg ex-wife!).

Bear in mind that the Ltd Co will cost you around £3k per annum in accountancy costs.

Before you do anything...  seek the expert advice of an accountant specialising in property taxation.

Have fun,
Alan

Hi Alan,

Thank you so much for your reply, that is really useful advice. I think I will hold off on that decision until I have a more substantial portfolio.

Thanks again

Joe

"Bear in mind that the Ltd Co will cost you around £3k per annum in accountancy costs."

I think you need to find another accountant!

Re the £3k for a limited company, quite agree (!)

 
however more seriosu point, ltd co's and BTL are a pretty appalling idea all round from a tax point of view following a number of changes to the tax rules in the past 5 years culminating in the 18% rate of CGT which pretty much makes is a "no go" unless you have very specific circumstances.

Its also very hard to borrow within a ltd co. which at the moment is rather and important aspect!

Regards, 

Hi James.

I've heard, over my couple of years on SP, that you're "The Man"... property accountantcy expert.

Although our accountant has helped us achieve great things, we are keen to achieve more.  Fancy dropping me a PM/email, James?

As a starter for one... if we could fund SARB BMV's via our Ltd Co, and if we bought 100 or so properties, could we find a way to make the Ltd Co work better than a Partnership?

Kind regards,
Alan 

James Smith:

Re the £3k for a limited company, quite agree (!)

however more seriosu point, ltd co's and BTL are a pretty appalling idea all round from a tax point of view following a number of changes to the tax rules in the past 5 years culminating in the 18% rate of CGT which pretty much makes is a "no go" unless you have very specific circumstances.

Its also very hard to borrow within a ltd co. which at the moment is rather and important aspect!

"could we find a way to make the Ltd Co work better than a Partnership?"

There are uses of a Ltd co, but not generally for holding now CGT is so low, although I imagine CGT will become less of a concern over the next 3-4 years so it depends very much on your circumstances, and really your accountant (assuming aren't too bad) should be on hand to help you with.

Regards,

Yes, £3000 seems to be a bit steep even for a limited company.

A company, generally speaking, is better for shielding income and using rental losses.