SDLT on incorporation

by Readers Question

7:24 AM, 21st June 2016
About 3 years ago

SDLT on incorporation

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SDLT on incorporation

I am a full time landlord and have a portfolio of properties that are all in my sole name. I am confused by the conflicting advice I have received from various tax advisers about incorporating via a property partnership to get around both CGT and SDLT. SDLT on incorporation

I find the partnership route very murky and open to challenge by HMRC and therefore I am inclined to incorporate direct from personal ownership (like Ramsey case) if the SDLT bill will not be too high.

I know that if you transfer 6 or more properties then you can opt to pay the commercial SDLT rate but what I am not clear about is; will the SDLT be payable on the total value of the portfolio or would it be averaged out with SDLT charged on the rates that apply to individual properties as is the case with Multiple Dwellings Relief.

Any answers would be greatly welcome.

Abdul Choudhury



Comments

Mark Alexander

7:33 AM, 21st June 2016
About 3 years ago

Hi Abdul

What I suggest you do is invest £97 into the spreadsheet we had produced and then spend a few days crunching the numbers in order to consider the various options available to you and all the potential outcomes.

I wish I could claim credit for the spreadsheet but I can't. It was my idea to have it produced but the accountancy bods who put it together must have had at least two brains each!

Not only does the spreadsheet clearly explain how the SDLT is calculated, it also does the calculations for you.

It also calculates your tax position if you stay as you are and compares that to incorporation.

It suggests strategies for you and clearly explains them.

It alerts you to other costs you may not have considered and then gives you alternatives to consider as well as who to talk to to obtain fully insured professional advice and implementation of strategy support.

It could prove to be the best £97 you have ever invested because when you have all the information and calculations in one place you will be in a far better position to make some very informed decisions.

The link to the page to purchase the spreadsheet is http://www.property118.com/landlord-tax-calculator/85679/
.

Hazel de Kloe

8:33 AM, 21st June 2016
About 3 years ago

This is a brilliant resource tool Mark.

You're right, I have yet to find a tax advisor who can fully get their heads around the various implications for existing landlords to consider the best way to structure going forwards. I now know where to point people!

Working out tax impications and best moves can be a challenge at the best of times, let alone when even more complexity is thrown at us!

NW Landlord

8:31 AM, 22nd June 2016
About 3 years ago

I incorporated using mark smith individually at first and got slapped with a 58k stamp duty bill to my horror

After speaking with mark it was clear that I have been running my businesses in partnerships for over 10 years as I split all responsibilities banks and mortgages It was just an oversight as I didn't realise there were separate rules and was in a rush to push it through I have now resubmitted my SDLT and all is good. To be honest there is no alternative as section 24 will decimate your business it's a no brainier in a partnership but if you are individual you will now get hit with huge bills

Adam Withford

9:56 AM, 25th June 2016
About 2 years ago

Maybe I am wrong, but why do you need to do a transfer? SDLT is only payable on a transfer, not on asigning of beneficial interest.

If you asign beneficial interst over to your Ltd Co, you can claim all relief through the Ltd Co. Yes, you need to then have an accountant to submit your corporation tax and there is now more tax on dividends, but it may be less compared to the new property income taxes coming in.

You dont need to tell your lender, because this is a tax issue and not a title issue. In fact, don't tell them because they will say no even though they have no power to do anything about it. Let sleeping dogs lie.

Abdul Choudhury

11:30 AM, 25th June 2016
About 2 years ago

Reply to the comment left by "Adam Withford" at "25/06/2016 - 09:56":

What you have suggested is very interesting. Are you saying that a beneficial transfer of ownership is not a "transfer" for the purposes of SDLT and thus I could avoid SDLT altogether if I beneficially transferred my whole portfolio into a Ltd Co from sole ownership? If so this would be the perfect solution.
However I am a bit surprised why none of the tax advisers I have seen have not suggested this to me and whether there is a good reason for that such as falling foul of the GAAR provision.

Is this something that you have done successfully? If so I would be interested to learn from your experience.

Mark Alexander

12:58 PM, 25th June 2016
About 2 years ago

Reply to the comment left by "Abdul Choudhury" at "25/06/2016 - 11:30":

Some very dangerous assumptions have been made here. I'm not going to go into detail as to why here, save to say, please take professional advice.
.

Mark Alexander

13:00 PM, 25th June 2016
About 2 years ago

Reply to the comment left by "Abdul Choudhury" at "25/06/2016 - 11:30":

Some very dangerous assumptions have been made here. I'm not going to go into detail as to why here, save to say, please take professional advice.
.

AA

15:46 PM, 3rd July 2016
About 2 years ago

Reply to the comment left by "Adam Withford" at "25/06/2016 - 09:56":

Hi Adam, no way in a month of Sundays would HMRC accept this scenario. They would look at the landscape of the arrangement and with loans in your name, they would challenge your assertion , and reinstate the position as is.


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