Transfering Property into a Limited Company

When you transfer property which in not your residential home into a company this must be done right as this has huge tax implications if not done correctly.

There is a way to get this into a company avoiding stamp duty but this only applicable to those who run this as an partnership.

By a partnership it means that there must be two or more partners, be you full time occupation and must be trading with a view to making a profit and this as per 1890 partnership act.

A good example of this would be:

  • Working more that 20 hours per week.
  • You do not have a agent running this for you.
  • You do all the repairs yourself.
  • You manage all the letting yourself.

In this tax year the mortgage interest starts to get restricted, so you will only be able to claim 50% of this and in following year it will get reduced to eventually to none being claimable meaning there maybe tax due on this.

 On the other hand, if this is run by a partnership you can claim the full amount of the mortgage interest.

If you have been claiming this on the land a property pages owning them personally or between you and a partner this will not be allowed, and you will have to transfer the property at market value and stamp duty will be payable along with capital gains tax.

I have come across prospects that want to change holding their buy to let properties in a company as apposed to holding them personally and the tax alone saving in one case was huge as he own 20 properties and paid his tax at the highest rate 45% and by trying to put these into a limited company would pay tax at 19%.

I this case the prospect had owned the property some time, so the value had increased significantly so when we factored in the cost of Capital Gains Tax and Stamp Duty this offset most of the tax saving.  

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