Rent family home and move it into Ltd Company?

by Readers Question

10:15 AM, 17th June 2020
About 3 months ago

Rent family home and move it into Ltd Company?

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Rent family home and move it into Ltd Company?

I’m currently in the process of purchasing a new family home. The plan is to keep our current family home and rent it out, the mortgage is low on the property (7% LTV to be precise). I currently also have a LTD company which holds 2 rental properties.

Our thinking is that we would transfer the once family home into the LTD company and then keep all the rental properties owned by the LTD.

I would assume that it would be a simple sell (from own name) to LTD company (buy).

Is there anything else worth considering?
Or is it as simple as this?
Is there any methods to reduce any costs when moving the asset across? Can anyone suggest the best routes to take for this?

Please help with any additional info if I’ve missed anything.

Thanks,

Steven



Comments

Mark Smith (Barrister-At-Law)

10:34 AM, 17th June 2020
About 3 months ago

1. Tax. SDLT will be payable by the company on the market value of the property regardless of the actual consideration.
CGT would be payable, but you will most likely have the PPR relief available.
2. Mortgage lender will need to either give consent or rewrite the loan agreement.

Paul McCarthy

10:43 AM, 17th June 2020
About 3 months ago

or do what I did...

Pay off the mortgage. Put the co name as joint owner of the property, then in 3 months take your name off !

Bingo. Your Ltd co will now own it outright

Luke

11:08 AM, 17th June 2020
About 3 months ago

Reply to the comment left by Paul McCarthy at 17/06/2020 - 10:43
Wouldn't this still trigger SDLT? As you are effectively passing property to the limited company. Perhaps it's different if you are 'gifting' it?

Beaver

11:25 AM, 17th June 2020
About 3 months ago

Reply to the comment left by Paul McCarthy at 17/06/2020 - 10:43If my memory serves me correctly...
Mark's comment that CGT would be payable is correct if you have previously rented the property out. It would be payable in proportion to the amount of time that you had lived in it versus the amount of time that you had rented it. If it was your principle private residence and hadn't rented it out or used it for business purposes then CGT probably wouldn't be payable.
Paul's comment is interesting. I think he means put your company name as joint owner (joint tenants rather than tenants in common) of the property then in 3 months time take it off. If you were married and co-habiting and the property were free of debt then you could transfer to the other party free of tax. If you had already transferred the company to somebody else and were holding it as joint tenants and then you died I believe the property would just automatically revert to the remaining tenant.
However, if Paul did this 3 months ago I suspect you'll find that taxes are still due...HMRC just haven't caught up with you yet.

XPP

12:09 PM, 17th June 2020
About 3 months ago

Hi Steven,
Moving a property in your personal name to an existing Ltd company is doable but not "walk in the park". You will have to engage a proper Tax advisor (to fully consider your personal situ) and a good Solicitor who is familier with this type of transactions (most of them don't) before embarking on this journey. Recently I did do this and it was a painful journey.... Inmy opinion take this journey only if it makes commercial sense... Hope i'm not sounding negetive....

Tim Rogers

12:10 PM, 17th June 2020
About 3 months ago

Very neat, is it entirely legal?
Also, should you demise within 7 years would it get picked up by inheritance tax?

Paul McCarthy

14:56 PM, 17th June 2020
About 3 months ago

Reply to the comment left by Beaver at 17/06/2020 - 11:25
I did this 5 years ago and have done so 3 times now....so, its an easy enough transaction.

Beaver

15:05 PM, 17th June 2020
About 3 months ago

Reply to the comment left by Paul McCarthy at 17/06/2020 - 14:56
Did you do it yourself or did a solicitor or conveyancer do it for you?

Anna Huang

4:20 AM, 18th June 2020
About 3 months ago

Reply to the comment left by Paul McCarthy at 17/06/2020 - 14:56
Very intersting! Would love to know more how you did it.

Adebowale Ajao

6:48 AM, 18th June 2020
About 3 months ago

I am hoping to do this soon as well. However if I choose not to then the income from the property will be taxed along with my other incomes. This may mean that i may then be taken into a higher tax bracket. Is my assumption correct here?

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