HELP we have 3 personal BTLs with 3 different lenders and want to incorporate?

Hi Lance,

Your situation is very common, in that most landlords have mortgages with different lenders.

Incorporation of your property rental business will obviously help to alleviate the Section 24 tax problems you are already experiencing, but more importantly it can massively benefit you and your loved ones in terms of Inheritance Tax planning.

The mortgage finance you have could all be carried into a limited company without affecting the lender’s security, as long as the legal transfer documents are properly drafted. This is therefore a job for the specialists!

It doesn’t surprise me that you can’t get a straight answer to your questions from the lender, because you\’re probably talking to the call centre staff, who will not be properly equipped to (a) understand your question and (b) know how to answer it! As I said before, this is a job for the specialists!

The best advice I can give you is to book a tax consultation with Property118 and get all the issues carefully considered before you make any decisions that could have either a huge beneficial impact on your life and your business, or cause further problems if not properly addressed.

To add to what Alex Caravello has said, you also need to consider Capital Gains Tax and Stamp Duty Land Tax. This is because the transfer of properties into a Limited Company is regarded as a sale and purchase.

In certain situation there may be reliefs available.

Even if incorporation isn’t immediately viable, there are other opportunities to explore.

Please book a Landlord Tax Planning Consultation with Property118 to progress matters.

I am equally in a very similar situation ad faced with a hefty tax bill. I would be very interested in knowing if there is a way out of this trap.
Please advice on who to consult with on this matter.
Thanks

Reply to the comment left by kher khulpateea at 21/09/2021 – 12:29
This is what Property118 specialise in.

A good starting point for you would be to download our eBook, which is FREE!

Please see the linked page below.

https://www.property118.com/ebook

Would an option be to create a Ltd Co to Operate your BTLs, the Ltd company would pay the mortgages and receive the rents via a management agreement between you and your company? You, as an individual, would not receive any income or pay the mortgages. But as a director and shareholder you pay yourself a dividend (and salary if required)? Any feedback greatly appreciated.

Reply to the comment left by SIMON VAUGHAN at 21/09/2021 – 13:49
The Ltd co could only charge a fee deemed ‘reasonable’ by HMRC for management costs, eg 15% or there abouts depending on area.

Reply to the comment left by SIMON VAUGHAN at 21/09/2021 – 13:49
Neil Patterson’s answer above is correct. Charging anything more than a market rent for management would fall foul of the “Transfer of Income Streams” legislation, as would the company servicing mortgages for which it is not legally responsible for.

See >>> https://www.legislation.gov.uk/ukpga/2009/10/schedule/25

I had exactly that in mind but my new accountant is still thinking about it .
So to recap:
Leave the Mortgages where they are
Set Up a Company
Rent Payments through the Co acc.
The CO charges myself 15% for management fee
Mortgages comes out of the same CO Acc.
Any profit distributed to the share holders after paying company taxes. Then I pay my personal taxes on the dividend .

Whoa, hold on; that is not what Neil is recommending!

What you have described is classic tax avoidance that HMRC will come down on very hard!

I recommend that anyone who is thinking of doing this – DON’T – please get a tax consultation from Property118.

I am not going to do that especially after your post. That is precisely why we are having this discussion. Surely one can lease the property to the company who then in turn manage and collect the rent .