So what does an aging small landlord do?

by Readers Question

11:16 AM, 20th November 2017
About A year ago

So what does an aging small landlord do?

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So what does an aging small landlord do?

I’m a small landlord, 4 BTL properties acquired over the last 13 years. 3 are in a limited company (no mortgages), 1 is owned privately. The privately owned one was re-mortgaged to fund the last property purchased, which I managed to slide into the company just prior to all the changes.

My original intention was to move the privately owned one into the company once the rather excellent mortgage deal ended (June 2018). Unfortunately 2 things now work against me, first, the 3% stamp duty, second the somewhat rapid and unexpected rise in value giving a capital gain of some £100,000.

At 60, I’m retired on medical grounds and I don’t spend 20 hours a week on property management/maint.

I am considering living outside the UK permanently due to my partner being a Chinese national and HMG’s process and requirements for a permanent stay visa being an absurd, illicit revenue source.

My accountants are very good, but may not be as inventive as some other folks within 118.

There seems to be a number of beneficial options for the more invested 118 member, but try as I might I do not seem to be able to identify a smart, legal way forward.

Any ideas, guidance welcome.

Tim



Comments

Darren Peters

14:03 PM, 20th November 2017
About A year ago

Why not investigate borrowing against the company-held properties to pay down the mortgage on the privately-held property? That way all of the finance costs will be with the company and so 100% deductible.

How did the private property slide into the company? Does the company owe you money for it?

In terms of going abroad then selling, you need to be away from UK for 5 years to avoid the CGT. No idea what taxes there are in Hong Kong. You might have to spend 6-months or a year on holiday in a jurisdiction with no CGT (or similar sales taxes) before settling in HK so no sales happened in your last UK tax year and no sales happened in your first Chinese tax year.

I'm not a professional, I'm having a guess so take professional advice before acting.

sam

14:09 PM, 20th November 2017
About A year ago

Tim : What do you want to achieve ?

Rod

14:43 PM, 20th November 2017
About A year ago

Reply to the comment left by sam at 20/11/2017 - 14:09
Sam, I as thinking the exact same????

Graham Bowcock

15:53 PM, 20th November 2017
About A year ago

Dear Tim

Depending what you want to achieve, you could sell the company, rather than the properties. For the buyer this may be advantageous from a stamp duty point of view. You would have to pay CGT on the increased value of your shares, but whichever way you go (in terms of a disposal) you will have to pay some tax.

You could enhance the limited company portfolio by selling your owned property to it, although as you have identified this would be subject to CGT and SDLT. I don't think you can move it over under statutory clearance as a private individual; I believe you need to be a partnership. You'd be well advised to take some expert advice on the tax as a good accountant may have ways to mitigate this.

Graham

Tim Rogers

16:21 PM, 22nd November 2017
About A year ago

Reply to the comment left by sam at 20/11/2017 - 14:09
Ideally I'm wanting to move the BTL that is in my name into the company. Once the current rate deal ends, June 2018, I was going to clear the mortgage and move it across.

There have been many ideas for moving property around posted on this site, but they all seem aimed at the multi million or 10 of property folks. I'm neither, I'm just trying to structure things so that passes on cleanly once I'm gone and gives an income in the meantime.

Tim Rogers

16:29 PM, 22nd November 2017
About A year ago

Reply to the comment left by dp1 Django at 20/11/2017 - 14:03
The third property slid into the company weeks before the 3% stamp duty and before the CGT was so large that I paid tax on it.

Yes, the value of the property in the company, at the time it was moved into the company, is owed to me as a capitalisation debt. So after corporation tax any monies come to me free of personal tax. This was rather nice when I was earning, but now is less advantageous.

tony

17:59 PM, 22nd November 2017
About A year ago

is the BICT strategy reversible and is there any IHT planning available with this.

Mark Alexander

20:48 PM, 22nd November 2017
About A year ago

Reply to the comment left by tony dupey at 22/11/2017 - 17:59
Hi Tony

BICT is not a strategy as such, it is a structure which negates the requirement for immediate refinancing at the point of incorporation.

Incorporation is reversible but would be very expensive.

There are many advantages to incorporation, one of which is additional options for legacy planning.

sam

21:01 PM, 22nd November 2017
About A year ago

My suggestion :
Take out a loan on one of the properties in the company to repay the loan on the property in your personal name. The interest charges r now fully deductible.
Leave the newly free of encumbrance property in your name so u can enjoy the income up to your Personal Allowance tax free. N your company can still continue to pay down your original capital if u want. Any capital gains (18% or 28%) will cease on your death. Your assets over n above the nil rate band will then b subject to 40% IHT.
U can also draw a wage if u want. N borrow more to repay your original investment - reduce your assets before death.

Mark Alexander

21:07 PM, 22nd November 2017
About A year ago

Reply to the comment left by sam at 22/11/2017 - 21:01
How do you get the money out of the company to repay the personal debt without paying tax? Unless the company already owes money to its Directors I cannot see how this could work.

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