Sole Owner To Corporate Landlord In 3 YearsMake Text Bigger
The benefit of becoming a corporate landlord is that it allows you to retain profits at corporation tax rates of 20% and falling, and continue to offset 100% of finance costs against income despite George Osborne’s tax changes for individual landlords being phased in from April 2017. It works best for portfolios where mortgage debt is in excess of £1 million.
For sole traders, optimal costs can be achieved by restructuring in three steps over a period of three years.
Step one – two choices
- Immediately transfer a percentage of the beneficial ownership in your property rental business so your spouse via a Declaration of Trust. There is no CGT between spouses and no need to disturb your existing mortgage arrangements but you may require our help to consider the optimal amount of beneficial interest to transfer for SDLT purposes ….. OR, if you are not married or don’t wish to involve your spouse …
- Immediately transfer 1% of beneficial ownership to somebody else (children, sibling, best friend etc.) and pay CGT and SDLT on that small amount if applicable. As above, there is no requirement to change legal ownership at HM Land registry hence no need to disturb your existing mortgage arrangements to achieve this
Submit partnership tax returns for the next three years.
After three years have expired, transfer 100% of beneficial ownership of the partnership to NewCo and claim s162 incorporation relief to mitigate CGT and SDLT relief under FA 2003 section 15 land and buildings. Use a beneficial interest company trust to avoid costs of refinancing.