Transfer of BTL properties to Limited company

While you think to transfer of BTL properties to limited company, you must keep eye on taxes, early redemption charges, legal fees and other different charges. These additional fees can prevent many of the landlords from transferring the BTL properties to limited company investment structure. But however, it totally depends on the landlords whether to move into limited company structure.

If you own buy-to-let properties and like to transfer into limited company, it is not easy to make transfer of those properties easily. Because, you and your company are two separate entity. Hence you must go through certain implications for transferring BTL properties to limited company.

Here are certain implications regarding the transfer of BTL property to limited Company:

1. The limited company must buy those properties at the open market value
2. The company is liable to pay the stamp duty rate associated to it
3. Also should pay the capital gains tax

There is no exception regarding the payment of stamp duty tax and that also in the additional rate. And also you cannot sell your property at any reducing value i.e. at discount.

Let’s have a look on capital gain tax in detail

Capital Gain Tax

You will be liable to pay the capital gain tax as per the stander CGT rules. But, from the case of Elisabeth Moyne Ramsay (2013), there are certain circumstances under s162 Taxation and Chargeable Gains Act 1992. This makes the landlord to have claim on incorporation relief (only in certain circumstances).

In this case, incorporation relief was eligible because the property was categorized as business.

Because of the following reason:

1. The property in this case is a business because landlord collect rents themselves.
2. And also landlord carries out the maintenance work on their own.

So, we can know that for being eligible for incorporation relief the property must be a business not an investment.

The property is a business:

1. If the landlord carry out the normal maintenance work on their own.
2. The landlord if select their tenants.
3. If the most of their income comes from their properties
4. And also if they collect rent from tenants themselves.

Advantages\Benefits you can obtain from investment in Limited Company Property

Key Benefit

The tax disparities are the key benefit, which has been increasingly frequent since the income tax relief adjustments. Limited company pays corporation tax (currently 19 percent) on its profits instead of paying income tax on your rental income (with a limit on the amount of relief achieved on interest charges to the basic rate of tax).

This can make a substantial impact for people in or near the upper income tax level, which is levied at 40%.

Other Benefits

Another advantage is that you keep more of your gains, which makes it easier to reinvest and expand your portfolio. Because family members can be appointed shareholders and directors, limited company structures may give prospective Inheritance Tax (IHT) and Capital Gains Tax (CGT) benefits.

Any investment you make in the limited business, such as personal funds for a deposit, can be redeemed at a later period provided it is documented as a director’s loan. Profitable limited corporations, likewise, provide you with the opportunity to receive dividends, which have different tax than income. However, consulting a professional tax consultant to see whether it is beneficial to you is important.

Investing through a limited company can help you to protect your personal credit score. Not paying utility bills or council tax by the tenants will make you liable as a landlord. And as a result your credit score may suffer. While making the investment, the company name is link to the investment, not your own.

Please do not hesitate to contact for any further enquiry,

Grab your phone and please call 02038027810 Krishna Dahal, or email krishna@focusaccountants.co.uk. We will arrange free initial consultation for 45 minutes with our CTA tax partner. Focus Somar Audit and Tax Accountants

On the other hand, if you have ten or more than ten properties in your name and looking for or would like a limited Company Suitability Review and Report, remember us and get in touch for further query.

Related: Tax Accountants in Harrow

Guidance: How to let