SDLT and CGT regarding new build and title split?

by Readers Question

9:06 AM, 1st May 2020
About 7 months ago

SDLT and CGT regarding new build and title split?

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SDLT and CGT regarding new build and title split?

We purchased land under a company name and built two semi-detached houses. We are trying to re-mortgage the properties, but the mortgage company is asking us to split the title in two so each house will have a title of its own.

Our solicitor has advised of the need to move one house from our company to another entity (like another company) only then will we be able to split the title.

We currently have two companies – 1st company which holds one title (this is the original company) and another that can hold the other title or house (this is our second company)

We would like to know if by moving one house from the 1st company to the 2nd, will we then have to pay stamp duty, land tax or capital gains or any other tax (SDLT)?

Do we have to have the 2nd property as a subsidiary of the 1st company, or wouldn’t that make any difference in regard to tax purposes?

Many thanks

Eli


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Comments

Neil Patterson

9:09 AM, 1st May 2020
About 7 months ago

Hi Eli,

It is this statement that does not sound correct to me?: "Our solicitor has advised of the need to move one house from our company to another entity (like another company) only then will we be able to split the title."

Craig M

10:01 AM, 1st May 2020
About 7 months ago

The only thing that jumps out to me here is the possibility of "Freehold and Leasehold" - with a single company not being able to hold both.
Just a thought.

james pearce

11:02 AM, 1st May 2020
About 7 months ago

Hi,
I can't really comment on above as such however we have recently done similar with just the one property and we are having a few issues with re-mortgage (Built with cash)
Most lenders weren't interested as they consider the company to be development rather than rental despite a change to SIC code and some even wanted us to transfer to a completely new co. which obviously isn't really viable with SDLT.
Good luck!

Mark Smith (Barrister-At-Law)

11:50 AM, 1st May 2020
About 7 months ago

1. There is no SDLT payable if there is a simple title split and the original owner remains the owner of both new titles-no disposal of any chargeable interest.
2. If you do go ahead with the two-company structure group relief from SDLT may be available.
Companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company.
A company (company B) is the 75% subsidiary of another (company A) if company A satisfies the following conditions
-is beneficial owner of not less than 75% of the ordinary share capital (either directly or through another company or companies as determined by sections 1155 to 1157 of the Corporation Tax Act 2010 of company B
-is beneficially entitled to not less than 75% of the profits available for distribution to equity holders of company B
-would be beneficially entitled to not less than 75% of any assets of company B available for distribution to its equity holders on a winding-up

MoodyMolls

19:03 PM, 1st May 2020
About 7 months ago

I converted one house into two and wished to split title. My solicitor said its difficult land registry does not like it unless it's being sold to another person.

I spoke with land reg, they said they might consider it if it was for mortgage purposes
When I asked time it would take they said 100 days.
So I just remortgaged on one title

callumst

20:30 PM, 1st May 2020
About 7 months ago

I had two houses on one title, we split them upon refinance last month for a reasonable fee. The solicitor created new titles which were registered simultaneously upon completion of the refinance. You have to run it by the lender to make sure they are happy but my broker said this wasn't uncommon and most lenders are fine with it. I spoke to a few solicitors who said it couldn't be done and you needed to transfer to a separate company etc, I found two that said they were comfortable to do it. Land registry rules were recently updated to allow this I believe, the reason your solicitor can give is that you are expecting financial hardship if you cannot refinance them.

JB

9:49 AM, 2nd May 2020
About 7 months ago

Reply to the comment left by callumst at 01/05/2020 - 20:30
Hi Callumst
Please can you tell me who the lender was?
Thank you


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