So what does an aging small landlord do?

So what does an aging small landlord do?

11:16 AM, 20th November 2017, About 4 years ago 27

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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

by sam

19:31 PM, 23rd November 2017, About 4 years ago

Reply to the comment left by Tim Rogers at 23/11/2017 - 15:30
*Makes no difference to your IHT liability whether the privately held property is transferred to company (as asset value will be balanced by an equal amount of debt) or you pay off the loan on your personal property by extracting cash from the company (as increase in personal property net value will be balanced by a decreased in company debt) - though you would have swapped a real property for debt (more liquid) and capped future growth if you do the former - at a cost today.
*Looking at your nos, your net asset = 450k + 240k -265k = 425k which is 100k over nil rate band. Can you extract that from the company before you kick the bucket ? Assuming this is your total asset value, I think your IHT issue should be quite manageable.
*If this personal property becomes your home (Principal Private Residence) at time of death, your estate also qualifies for residence nil rate band of 175k if you pass it onto your direct descendents. ie you have 75k to spare for IHT purpose which may be sufficient to take care of future growth of this property. (CGT not a consideration as it dies with death).
*Personal property loan = 100k on interest of say 5k - would new rule on interest relief make any difference ? I assume you will only have rental income from this property + wages from the company to make up to Personal Allowance and make up the balance of your living expenses from repayment of capital - you can 'earn' up to 43k - 5k before this interest relief lark affects you. Return of capital is not part of the equation.
*I trust your 2 shares are the only voting shares and the 1000 shares are non voting - I appreciate what you say about trust but this way you removed trust from the equation. It is not them you have to worry about. It is their future/potential spouse.
*Probably too late now : might have been worth putting the 1000 shares in trust to protect the beneficiaries from potential spousal attack/bankruptcy or similar.

I am not a professional so cant be 100% sure what I said is correct. Any comment/correction would be welcome.

As always, I am not giving anybody any advice - although why I should have to say this in a public forum for which I get no fiduciary benefits in any way beats me. But then everybody seems to be saying it. So I think I better too.

by Mark Alexander

21:51 PM, 23rd November 2017, About 4 years ago

Reply to the comment left by tony dupey at 23/11/2017 - 17:10
Your sentence is incredibly long and appears to raise several issues and asks several questions. I am struggling to follow. Any chance you could break it down into a list of separate questions please?

One point I can comment on at this stage is that BICT only becomes relevant when you incorporate. It is black or white, if you don't incorporate then BICT isn't applicable.

by Tim Rogers

10:57 AM, 24th November 2017, About 4 years ago

Hi Sam, thanks for your input.

IHT is an interesting one. Currently I own 0.2% of the company, but it owes me some £430,000 from the capitalisation. They both can be counted towards IHT. Where on the sliding scale of company property value increase and debt reduction things will be when I "kick the bucket", as you so charmingly put it, is an open question without an answer.
Ideally all the debt will be repaid or IHT will not longer exist.

I am informed that as the single BTL in my own name has never been my personal residence, even if it were the only property in my name, I would not be able to gain any benefit from that fact. Apparently HMG kick off big time on this.

My BTL investments are approximately some 40% of an overall portfolio. My personal residence is a further 30%.

I am not effected by either the new limits on interest relief or higher rate tax. The loan interest rates are 0.99% above Base and the BTL mortgage 2.99% fixed until 1/8/2018, (memory fault when I stated June)

Yes, my accountants ensure the maximum use of my tax free personal allowance.

I have no direct descendants.
My fellow company shareholders are a young married couple, the husband I have known since birth.
I do appreciate the need to consider worse case scenarios which is why there are a charges/restrictions registered with the land registry.

T

by tony

12:18 PM, 24th November 2017, About 4 years ago

hi sorry for the confusion my questions are , as a sole T with around 30k pa loan interest at present , was planning more re-finance if possible ( struggling) and approx £100k + income i was interested in the BICT and was wondering if after transferring the Beneficial interest to a co trust it could be reversed if required ie back to me or someone else,
Also i was asking if it was more or less beneficial to use an offshore co .
And lastly what IHT planning can be used with the BICT ,

by Mark Alexander

12:22 PM, 24th November 2017, About 4 years ago

Reply to the comment left by tony dupey at 24/11/2017 - 12:18
Hi Tony

I am unable to answer those questions without the benefit of a full consultation, for which we charge £400.

If you book and pay for a consultation and are not satisfied we offer a guarantee of a full refund on request. I cannot say fairer than that can I?

by sam

21:32 PM, 24th November 2017, About 4 years ago

Reply to the comment left by sam at 23/11/2017 - 19:31
My first question was : what do you want to achieve ?
I dont see how you have a problem. If you do, it sounds like a happy one.
You have no direct descendants.
S24 doesnt affect you.
Your assets have been given away to people you care about as you want and planned. And you are protected while you are alive.
You have more than enough asset to live on even if you dont make another penny - assuming you dont live for another 60 years.
Why worry about things like residence nil rate band in your position ? - not sure if you are correct but what difference does it make ?
Why not liquidate half your assets and lord it up in the far east for your remaining years ? If you spend £1k a week every week, it will take you 20 years to get through £1m. Cost of living is so low in parts of the far east, you will struggle to spend £1k a week. Unless you are used to that kind of life style and unless your Chinese national partner is well skilled in the art of spending/wasting money, you will soon tire of it and that £1m will last quite a bit longer and even longer when you state pension kicks in.
Stop worrying and go learn how to spend that money my friend.

by Mark Alexander

22:37 PM, 24th November 2017, About 4 years ago

Reply to the comment left by sam at 24/11/2017 - 21:32
Best bit of advice on this thread!


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