Beware BICT Copycats

There are now several ‘copy-cat’ structures which appear very similar to the BICT “Beneficial Interest Company Transfer” structure being offered by tax-planners but many of them do not obtain non-statutory clearance.

BICT is a legal structure which enables landlords to avoid the costs associated with refinancing at the point of incorporation. It has no tax advantages but it does afford an opportunity to keep attractive mortgage facilities in place.

However, when BICT is done badly it can have dire tax consequences.

We have mystery-shopped some of the copy-cat companies and it is very clear that they are offering extremely dangerous advice, in that the structures they are promoting fall short of delivering all of the promises they make. For example, some are transferring beneficial interest using a Deed of Trust but are completely overlooking the importance of a professionally drafted Business Sale Agreement and a Clearing Agency Contract between the company and the mortgage borrower. Many lenders will not accept mortgage payments from companies, hence the payments are being made to the landlord who in turn pays the mortgage. This is fine in principle, but there could be major tax consequences if the paperwork is wrong or if there isn’t any at all. We suspect many of the landlords using these ‘copy-cat’ schemes will find that their mortgage payments will be deemed to be income paid to them by their company and taxed accordingly by HMRC, which is very worrying indeed.

We think one of the reasons Property118 Limited has been so successful of late has been due to our fee charging structure in regards to assisting with non-statutory clearance applications. Our fee is just £1,500 + VAT but that is refunded in full if clearance is declined. That peace-of-mind seems to be making all the difference.

Incorporation using the BICT structure is only one of the tax planning strategies recommended by Property118 Limited. This is because there is no ‘one-size-its-all’ solution. For this reason, an initial consultation is required to establish the current position and future aspirations of clients prior to an analysis and a detailed written report being prepared and followed up with a telephone or Skype based Q&A session. Clients of Property118 Limited are encouraged to include their accounts in this process and this in turn often leads to those accountants referring more of their clients. The fee for these consultations is £400 and comes with a guarantee of total satisfaction or a full refund.

The legal work associated with the implementation of BICT incorporation is always referred by Property118 Limited to Cotswold Barristers where clients own properties in England & Wales. For clients in Scotland, an Edinburgh legal firm provides additional assistance in regards to preparing the paperwork and dealing with LBTT returns, which are invariably £nil for business partnerships.

Mark Smith, Head of Chambers at Cotswold Barristers said; “we are delighted with the symbiotic relationship with Property118 Limited and the work flowing therefrom. We reciprocate wherever possible and fully anticipate the number landlords using the BICT strategy for incorporation to continue to increase”