It’s official – NO NEED to refinance when incorporating into a limited company

It’s official – NO NEED to refinance when incorporating into a limited company

19:00 PM, 1st February 2021, About 8 months ago 45

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HMRC CONFIRMS you do not have to refinance all your properties when you incorporate your portfolio into a Limited Company.

In this video below, Mark Alexander from Property 118 & I, Ranjan Bhattacharya, break down exactly what this means for property investors!

HMRC Capital Gains Manual CG65745:

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65745

 

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  • Please provide an overview of your circumstances and what you are looking to achieve.
  • Landlord Tax Planning Consultancy is the core business activity of Property118 Limited (in association with Cotswold Barristers).


Comments

by Phil

23:03 PM, 1st February 2021, About 8 months ago

We have a number of properties in our personal portfolio which are all mortgaged and it was welcome news that they can be incorporated into my limited company without re-financing.
There are two points that the excellent video did not cover:
• whether SDLT would be payable on the transfer
• If the mortgage term expires, does that mean we would have to take a business mortgage to re-finance it at that point in time or can we re-finance it personally ?
Perhaps you can throw some light on these queries....Thanks

by SimonP

23:22 PM, 1st February 2021, About 8 months ago

That's really lovely from HMRC but more to the point, what do the lenders say because, after all, they (usually) have first charge on the mortgaged property? Are they going to be agreeable to ownership being transferred/sold to a limited company?

by Gary Nock

7:18 AM, 2nd February 2021, About 8 months ago

Reply to the comment left by Phil at 01/02/2021 - 23:03
Unless I read the manual wrong it appears not:

"Where liabilities are taken over by a company on the transfer of a business to the company, the Revenue are prepared for the purposes of the ‘rollover’ provision in TCGA 1992 s 162, not to treat such liabilities as consideration. If therefore the other conditions of s 162 are satisfied, no capital gain arises on the transfer. Relief under s 162 is not precluded by the fact that some or all of the liabilities of the business are not taken over by the company"

by Roger P

9:03 AM, 2nd February 2021, About 8 months ago

Reply to the comment left by SimonP at 01/02/2021 - 23:22
I think that will be the sticking point, as lenders only care about their security, we'll see

by Mark Alexander

16:41 PM, 2nd February 2021, About 8 months ago

Reply to the comment left by Phil at 01/02/2021 - 23:03
We cannot answer your SDLT question without a full tax planning consultation.

If the mortgage term expires then yes, you would have to arrange any new financing in the company name. You will be surprised at how close the pricing is for portfolio landlords in a company when compared to private these days. Also, the 'affordability' criteria is far more relaxed for companies.

However, if you are just looking at a product switch with your existing lender, that's fine.

by Mark Alexander

16:42 PM, 2nd February 2021, About 8 months ago

Reply to the comment left by SimonP at 01/02/2021 - 23:22
The legal ownership is not transferred to the Limited Company, so the lenders security is unaffected.

by Mark Alexander

16:43 PM, 2nd February 2021, About 8 months ago

Reply to the comment left by Roger P at 02/02/2021 - 09:03
The legal ownership is not transferred to the Limited Company, so the lenders security is unaffected.

by John Hynd

5:06 AM, 3rd February 2021, About 8 months ago

Reply to the comment left by Mark Alexander at 02/02/2021 - 16:41£400 consultation fee seems a bit steep for confirming whether SDLT would be payable on the transfer to a LTD company. I'm sure this particular information will be available free of charge very soon.

by Gary Nock

9:36 AM, 3rd February 2021, About 8 months ago

I don't think the £400 is just for SDLT. It also provides advice on the company structure so as to be HMRC compliant and savings going forward. When you consider that Section 24 virtually doubled tax on landlords and the £400 fee is tax deductible, it needs to be viewed from that perspective.

by Mark Alexander

11:13 AM, 3rd February 2021, About 8 months ago

Reply to the comment left by John Hynd at 03/02/2021 - 05:06
As Gary said.

Our consultations leave no stones unturned.

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