Mark Alexander - Founder of Property118

Absolutely not in both scenarios you have described.

Transferring beneficial interest back from the company to the individual would be a separate taxable event for both CGT and SDLT.

What would happen in practice is that the company would instruct the trustees to sell the property on its behalf. Ideally, this will be minuted. The important thing is that the net proceeds of sale would belong to the beneficiary, i.e. the company, meaning that all net sale proceeds would need to be paid into the company bank account as soon as possible after the sale is completed. The company would then account for any profits made on the sale of the property over and above the market value it was acquired prior to incorporation.... Read More

Thanks for your thoughtful feedback — I’m really glad the paper has helped to spark deeper thinking around estate and succession planning.

You’ve raised some excellent questions — and they go beyond beneficial ownership alone, touching on trusts, limited company structuring, and inheritance implications. While I can’t provide personalised advice, I can offer some general observations and point you in the right direction:

1) Beneficial ownership via Ltd Co

If beneficial ownership of a rental property portfolio rests with a limited company, then what happens on the death of one spouse depends largely on how the shares in the company are structured. If the shares are jointly held 50/50, those shares would usually pass under the deceased’s Will (or intestacy rules if no Will exists). The company continues to own the beneficial interest uninterrupted.

2) BTL mortgage in personal names

If the legal title (and mortgage) remains in personal names, then on death, the surviving joint owner would usually retain the legal title — but again, much depends on how the legal and beneficial interests were separated. The lender’s position would also be relevant at that point, especially if refinancing or restructuring is required.

3) Trust vs Ltd Co ownership

There’s no one-size-fits-all answer here. Trusts can offer more control over who benefits and when, but they can also be subject to complex tax and reporting rules (e.g. the Trust Registration Service). A limited company offers different estate planning benefits — often linked to share structuring, family investment strategies, and potential CGT/IHT planning.

4) Children as Trustees or Shareholders

This is a really important distinction:

• Trustees manage the trust for the benefit of beneficiaries, but do not personally benefit unless also named as such.

• Shareholders in a limited company own equity and may receive dividends, voting rights, or value on exit — subject to how the shares are classed and what the Articles say.

For inheritance planning, each path has implications for control, tax exposure, and risk, so it’s important to take advice tailored to your family’s objectives and risk appetite.

For general guidance on how inheritance tax interacts with companies and trusts, HMRC’s resources are a good starting point:

👉 https://www.gov.uk/inheritance-tax/gifts

👉 https://www.gov.uk/trusts-taxes

Wishing you all the best with your planning — and thanks again for engaging with the white paper.... Read More

Thanks for taking the time to read the paper — and for your thoughtful questions. I’ll do my best to steer you in the right direction without stepping into personal advice.

1. Responsibility for outgoings

The transfer of beneficial interest doesn’t automatically change who is responsible for financial obligations like mortgage payments or property outgoings. These arrangements are typically clarified in the Declaration of Trust itself. Where the legal owner remains responsible for the mortgage (as is usually the case), the direct debit would generally remain in their name. You’re right that attempting to change this could alert the lender, so it’s something many people choose to leave as-is unless refinancing.

2. Use of a solicitor

While many declarations between spouses are straightforward, it’s still important that the document is valid, enforceable, and clearly drafted. Whether or not a solicitor is needed depends on your level of comfort, but even simple trust templates should ideally be reviewed by someone who understands the tax and legal implications — particularly if you expect to rely on the document for CGT, IHT or income tax purposes.

3. Reversal of a trust

Reversing a declaration of trust can be done, but it’s not automatic. It generally requires a Deed of Variation or Termination, and both parties must agree. If any tax consequences were triggered by the original declaration, those can’t necessarily be unwound by reversing the arrangement later.

For general guidance on trusts and their implications, you may find HMRC’s pages useful: 👉 https://www.gov.uk/trusts-taxes

And if you’re considering setting one up or making changes, it’s always worth having a conversation with a solicitor or tax adviser who deals with property ownership and trusts.... Read More

Thank you for your kind feedback — I’m really pleased to hear the white paper has been helpful.

Your question about whether a trust with split legal and beneficial ownership needs to be registered with the Trust Registration Service (TRS) is a good one. The answer depends on the specific type and purpose of the trust, and whether it falls within the scope of HMRC’s TRS rules under the Money Laundering Regulations.

The best source for guidance is HMRC’s official TRS Manual, particularly the section on what constitutes a registrable express trust. You can start here >>> https://www.gov.uk/guidance/register-a-trust-as-a-trustee

If you're unsure whether your arrangement requires registration, HMRC also provide a helpline for trustees and their agents:

📞 HMRC Trust Registration Helpline: 0300 123 1072 (Mon–Fri)

Because trust registration can carry penalties if overlooked, I’d suggest getting personalised advice from a solicitor or tax adviser familiar with trust structuring — especially when involving family members.... Read More

The point of the article isn’t to be defensive, it’s a caution to the mortgage industry that the perception of financing at incorporation is far from risk free and carries high risks as reported by highly credible sources.... Read More

I think I probably agree with the sentiment of your comment, particularly that MFB added the financing offer. However, it was very convenient for MFB that the risk based guidance in Simon's Taxes and references to the HMRC manuals were missed out from the risk warning section of the article, don't you think?

I would hate to think that 10's of thousands of landlords, lenders, lawyers and Accountants could read this article and conclude that raising new finance in a company name to repay existing private financing at the point of incorporation carries no risk of HMRC refusing ESC/D32 on the amount of the new financing, because the CGT due on that could be a devastating number for any landlords with high debt values.... Read More

Tony, the key distinction here is that the incorporation structures supported by Property118 are firmly grounded in HMRC manuals, established case law, and authoritative sources such as Simon’s Taxes. In contrast, the “Hybrid LLP” model you promoted while a Director at Less Tax 4 Landlords lacked any such technical foundation.

To this day, I’ve seen no credible tax authority or HMRC guidance to support the core claims made under that model, including:

1) That property values could be re-based for CGT calculation purposes.

2) That the LLP structure converted property investment activity into a trade qualifying for IHT relief, including BADR.

3) That the structure circumvented the finance cost restrictions introduced under s24.

For years, we consistently warned that partial transfers to a corporate member of an LLP could attract both CGT and SDLT, and that the Transfer of Income Streams rules under Schedule 25 FA 2009 could also apply.

You also dismissed the incorporation planning we supported—despite it being backed by published guidance and decades of established tax practice.

So no, it’s no surprise we never agreed. One approach followed established precedent and professional guidance. The other simply did not.... Read More

Thank you for your comment. Only time will tell whether this really is a “storm in a teacup.” One possible outcome—though I hope it doesn't come to pass—is that HMRC decides to revisit every incorporation where new company borrowing was used to repay personal or partnership liabilities, arguing that such loans constitute partial consideration other than in shares, thereby invalidating a potentially substantial element of incorporation relief and creating significant CGT exposures.

I suspect HMRC may avoid that path, not least because it would be extremely difficult to argue—especially in a tribunal—that this hasn’t become an established and accepted practice over several decades.

That said, Property118 supported and followed the guidance that has existed for over 50 years, as set out in HMRC’s own manuals, including CG65745, which confirms that indemnified liabilities can form part of the incorporation without triggering CGT, provided conditions are met. That approach remains legally sound and tax-compliant.

Ideally, HMRC should now respond to the CIOT’s outstanding technical questions and clarify whether repayment of pre-incorporation liabilities using new company borrowing has become a recognised and accepted alternative to the existing guidance. If so, manuals should be updated accordingly—just as HMRC did after the Upper Tribunal’s decision in Elizabeth Moyne Ramsay.

With clearer guidance, Lexis Nexis can then revisit the warning in Simon’s Taxes at B9.114, and professionals and clients alike can proceed with certainty.

Clarity from HMRC would benefit everyone.... Read More

That's an excellent question because the manuals and industry guidance are all silent on the point of how long after the creation of the indemnity can the company discharge that indemnity on the basis of refinancing. My opinion, in the absence of any HMRC or accepted industry guidance to the contrary, is that the discharge of the indemnity could occur literally one second after it is in place. It's a bit like a simultaneous exchange and complete in that the reality is that it is physically impossible for both events to actually occur simultaneously.... Read More

Continued …

What’s most frustrating is that this issue has persisted for decades. Incorporation relief was widely granted even in cases where new company borrowing was used to repay personal debt—contrary to both Simon’s Taxes and HMRC’s own guidance in CG65745. Now, instead of addressing the root issue or correcting the record, HMRC appears to be doubling down, possibly due to embarrassment or internal uncertainty.

Our role isn’t to rewrite history—it’s to ensure our clients act in line with published guidance and longstanding best practice. That’s what we’ve done, and it’s why we continue to defend them.... Read More

That's a very brave statement for your adviser to make, especially since HMRC has not been able to provide an answer to the questions raised by the Chartered Institute of Taxation for well over a year now.

Perhaps HMRC do not want to accept that their manuals and expert industry best practice books have been wrong for over 50 years. More likely though, in my opinion, they just don't know what to do about the fact that they have been turning a blind eye to poor advice and allowed incorporation relief on cases where they should not have done so for decades now (i.e. those cases where new company financing repaid previous private lending), and this whole issue has become extremely embarrassing for HMRC, the professional bodies and the thousands of solicitors, barristers and Accountants that have not advised and operated in accordance with published best practice and HMRC manuals..... Read More

It doesn't mean anything much to our clients. This article was shared as a warning to the mortgage industry and any landlords considering incorporation.

Property118 followed the HMRC manuals and industry best practice manuals in both letter and spirit. Sadly, others are not doing so.... Read More

Hi Raj,

When incorporating your buy-to-let property into a limited company, and treating the equity as a Director’s Loan, here’s how you can structure it:

Treating Equity as a Director’s Loan:

The equity in the property (calculated as the market value minus the outstanding personal mortgage) can be treated as a Director’s Loan from you to the company. This does not require a separate cash transaction, as the transfer of value (equity) is sufficient, provided it’s correctly documented.

Funding the Purchase:

The company can secure a mortgage to pay off the existing personal mortgage and any additional cash you wish to take out of the deal. The remaining portion of the purchase price, representing the equity, forms the Director’s Loan. Ensure the property is sold to the company at its market value.

Documentation:

A Director’s Loan Agreement should be drawn up, outlining the loan amount, repayment terms, and any applicable interest. Proper documentation ensures compliance with company law and avoids future complications.

Mortgage Lender Considerations:

Not all mortgage lenders are willing to finance such arrangements. It’s crucial to work with a specialist mortgage broker who can identify lenders familiar with incorporation-related transactions.

Professional Support:

Engage an accountant experienced in property incorporations to handle the financial and tax aspects. You have already explained that you will pay CGT and you only have 60 days to account to HMRC for this. Additionally, a legal professional can assist with the transfer of ownership, preparing the necessary agreements and the SDLT payments for the company.

This approach ensures that your equity is properly recognised as a Director’s Loan within the company, with minimal disruption to your overall financing.... Read More

No, it doesn't... Read More

Yes I agree and did wonder the same thing. However, he seems a pretty clued up chap so I’m sure there must have been a plausible reason.... Read More

The sound issues are now fixed... Read More

Hi Chris

The answer is Yes but the tax consequences need to be thought through properly. This isn’t the place to do that. Please contact your Property118 consultant.... Read More

Not really. If your business is an established Partnership there may be no SDLT due but forming a Partnership with the intention of mitigating SDLT falls foul of anti-avoidance profer.

If there are genuine commercial reasons for the existence of a Partnership that’s fine, but be prepared to be challenged by HMRC over it and be prepared to run the Partnership for a considerable amount of time to demonstrate substance over form. A minimum of years three years is the guidance most professional advisers recommend.... Read More

For the reasons already given, property investment businesses are NOT eligible for , “Retirement Relief” (AKA Business Asset Disposal Relief or BADR).... Read More

... Read More