Higher SDLT refund via selling property to limited company?
My hubby and I were unable to sell our residential property A before buying new main residential home B in Aug 2017, so we paid an extra £25k in stamp duty because of the second home tax surcharge of 3%.
In the meantime we’ve rented out property A since then.
We always planned to sell A before the three year mark, and claim back the extra stamp duty we paid.
This morning I had a thought – If we set up a limited company that purchases property A from us. The company will have both of us as directors. Company will be paying stamp duty for purchasing the property A.
Could we then claim back the extra stamp duty paid on property B?
Does it matter that we are the director of the company? Because one could argue it is linked in come way. But again a company is a separate legal entity. I cannot find guidance on HMRC website.
Thank you
Emily
Editors Note: Please ignore the 18 months below as it is now 3 years.
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Member Since February 2011 - Comments: 3453 - Articles: 286
8:57 AM, 9th August 2019, About 7 years ago
If you replace a previous main residence with another main residence then you have up to 3 years to sell the old one and claim a refund of the 3% surcharge on the new main residence.
This is assuming that you will only have one property owned in your name at the end of the transactions and it is your main residence.
Do not forget this will be offset by a Stamp duty and CGT liability on any property you move into the Ltd company without our assistance assuming there is no latent gains. I would not anticipate moving one property would be would be cost effective to involve our Barrister.
Technically property A will be owned by the Ltd company and not you, but as this is a refund of the Surcharge I have not seen a transaction under exactly these circumstances so I would pay for advice from your accountant or solicitor that will be insured by their PI insurance just in case HMRC have a different take on this.
Member Since November 2015 - Comments: 584
9:09 PM, 9th August 2019, About 7 years ago
Yes, I believe that you could reclaim your SDLT by selling within the 3 year period, however the purchasing company would have to pay SDLT at the additional 3% rate, so what you receive with one hand you will be paying out with the other. (Ignoring your costs incurred for being a party to BOTH sides of the transaction).
Unless of course the SDLT on your new property is SUBSTANTIALLY higher than the SDLT on property A would be at the additional 2nd property rate your return for your efforts may not be worth it, bearing in mind the ongoing accountancy costs of a company. Are you planning on expanding your portfolio by purchasing more investment property in the company, or continuing to rent out your second property in the company, or just buying time to sell it at a later date?
You will of course pay Corporation Tax on any gains made in that time.
Member Since August 2019 - Comments: 4
10:31 PM, 12th August 2019, About 7 years ago
Reply to the comment left by Kate Mellor at 09/08/2019 – 21:09
Thank you Kate for your reply. Property A is cheaper, half price of Property B. We are higher tax payer. Hope to rent out continually and use profit to buy more if opportunity rises.
Member Since August 2019 - Comments: 4
10:34 PM, 12th August 2019, About 7 years ago
Reply to the comment left by Neil Patterson at 09/08/2019 – 08:57
Thanks Neil.
Member Since September 2019 - Comments: 1
11:46 AM, 23rd September 2019, About 7 years ago
Hi Emily,
Did you go ahead with this. I am looking to do exactly the same thing.
Thanks
Member Since July 2020 - Comments: 1
7:54 PM, 18th July 2020, About 6 years ago
Hi Emily
I’m also contemplating doing this? Did you proceed?
Varun
Member Since August 2019 - Comments: 4
7:54 AM, 20th July 2020, About 6 years ago
Reply to the comment left by S patel at 23/09/2019 – 11:46
Did not proceed in the end. Have you proceeded and was it successful?
Member Since May 2024 - Comments: 1
11:08 PM, 20th May 2024, About 2 years ago
I am planning to do the same within the next 2 weeks as I am owed 22 K as 3 % additional SDLT when I bought my B property in personal name and I only need to pay 5K SDLT to buy my property A in a new LTD.
Any advice welcome. How did it work with yours?