12:55 PM, 26th July 2017, About 5 years ago
July 2017 has seen Property118 Limited help more landlords using the Beneficial Interest Company Transfer “BICT” incorporation structure to obtain HMRC non-statutory clearance for relief under s162 TCGA 1992 than ever before.
Non-statutory clearance for using the BICT incorporation structure provides ‘peace-of-mind’ to landlords who want to be certain of being able to roll capital gains in their property portfolios into shares in the company they are transferring the beneficial interest of their assets into whilst avoiding the costs associated with refinancing.
Advantages of incorporation from a tax perspective are that companies are unaffected by legislation which progressively precludes finance costs incurred by individual landlords being claimed as a business expense. Furthermore, incorporation using this structure re-sets the value of properties for the purpose of calculating tax on capital gains to the current value which is also indexed in a company structure. This enables landlords to trade their properties without having to worry about personal CGT. Many landlords also have attractive financing terms they arranged pre-credit-crunch and do not wish to disturb these. Using the BICT strategy to incorporate they don’t need to.
There are now several ‘copy-cat’ structures being offered by tax-planners but many of them do not obtain non-statutory clearance. 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”
Mark Alexander, founder of Property118 said; “this news will be very welcomed by many landlords and their accountants and is one in the eye for critics of the BICT incorporation structure”Show Book a Tax Planning Consultation