Cash purchase, renovate then refinance with Ltd co mortgage?

Cash purchase, renovate then refinance with Ltd co mortgage?

10:08 AM, 5th October 2021, About 2 weeks ago 10

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I currently have a small portfolio with my partner as a partnership. We are just under the threshold for section 24 as my partner only works part-time.

I’ve just agreed on a sale for our next property in cash and after a full renovation was going to refinance it with a buy to let mortgage.

The Question is: Can I refinance it using a Ltd company mortgage after buying it cash in my own name?

Will this result in any costs?

The cash fund came from remortgaging my current residential property.

Many thanks

Nick



Comments

by Neil Patterson

10:15 AM, 5th October 2021, About 2 weeks ago

Hi Nick,
I am a little confused on this one:
Do you already have Limited company?
Are you purchasing in the name of the Limited Company?
You can't use a new Ltd co BTL mortgage with the property in your individual name.
You can't just transfer a property into the legal name of a company without triggering a SDLT or CGT liability.

I am guessing the advice would be to purchase in the name of a limited company and borrow the money on the BTL simultaneously so you are not investing all your own capital into a Ltd company that you have already paid tax on.

Please do let us know the full extent of your plans, but I would very much recommend you consider a tax consultation first >> https://www.property118.com/tax/

by Clive Gilbertson

11:10 AM, 5th October 2021, About 2 weeks ago

You could lend the money to your Ltd company, purchase the property in the company then when refinancing repay the loan to yourself at no cost/tax, even pay yourself some interest saving tax as you have an allowance.

by albert stovell

11:37 AM, 5th October 2021, About 2 weeks ago

I have a small porfolio in my wifes and my names I have been told that if i want to start a limited Company we will have to pay CGT and various other payments . Why can,t we just call ourselves a
property company

by Alex

12:01 PM, 5th October 2021, About 2 weeks ago

Hi Nick

If you are already an established Partnership, then it makes sense to consider incorporating your partnership into a limited company. This carries many benefits, which includes the ability to deduct finance costs as a legitimate tax deductible expense. This may not be a problem for you right now, as you say you are “just under the threshold for section 24”, but as you buy more property this is likely to become a problem for you.

Do you have children, because the biggest reason to incorporate into a Smart Company Structure is to shield the future capital growth in property values from Inheritance Tax. A partnership won’t help you in this respect.

I recommend that you book a Property118 Tax Consultation so that we can look at your specific circumstances and deliver a solution that ticks all the boxes for you.

by Porka123

13:10 PM, 5th October 2021, About 2 weeks ago

Hi I don’t have a limited company just a established partnership.Not looking to incorporate just yet.
The sale is agreed but not signed paperwork with solicitors till tomorrow, can solicitors start work or do I need to start a separate ltd company today?
If so what’s involved?
I do have a son so I need to think about future incorporation but this property is just on the edge of the threshold so it could push me over the edge depending on renovation/mortgage costs etc.
Many thanks for your help.

by Neil Patterson

13:24 PM, 5th October 2021, About 2 weeks ago

Reply to the comment left by albert stovell at 05/10/2021 - 11:37
Hi Nick,
Please, whatever you do, at least download our Ultimate Guide as there is some 'cart before the horse' going on here >> https://www.property118.com/tax/

by Mark Alexander

13:25 PM, 5th October 2021, About 2 weeks ago

Reply to the comment left by Porka123 at 05/10/2021 - 13:10
I agree with Alex Caravello.

At the very least you should download and read our eBook at https://property118.com/ebook

The above is free.

When you realize what you’re missing out on in terms of Tax Planning opportunities I’m sure you will want to book a Consultation with a member of the Property118 Tax Team.

by Graham Bowcock

11:54 AM, 6th October 2021, About 2 weeks ago

Reply to the comment left by albert stovell at 05/10/2021 - 11:37
You can't just call yourself a company as it's different legally than a sole trader or partnership. Any transfer of property from yourself to the company is effectively between two different parties, even if you own the company. The only exemption is transferring an established partnership to a limited company, where the ownership of both is the same (but suject to meeting certain criteria).

Aside from the exepmtion mentioned, if you transfer property from personal ownership to a limited company, you will pay CGT on the disposal and the company will pay SDLT on the purchase.

by Alex

12:04 PM, 6th October 2021, About 2 weeks ago

Hi Graham

You have made some good observations.

However, I disagree that Nick "will pay CGT on the disposal and the company will pay SDLT on the purchase". These taxes may become due, or they may not, depending on the individual circumstances.

That's why only bespoke and individual advice can be relied upon. There is no 'one size fits all' solution 🙂

I recommend that Nick books a 'satisfaction guaranteed' Property118 Tax Consultation to receive bespoke advice that relates to his specific circumstances >> https://www.property118.com/tax/

by Graham Bowcock

12:16 PM, 6th October 2021, About 2 weeks ago

Reply to the comment left by Alex at 06/10/2021 - 12:04
Thanks Alex, Quite agree - have moved property myself without tax, but from partnership to corporate. My main point was to highlight the difference bewteen patrernship and limited company. I felt that the commentor was perhaps a bit naive!


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