Stamp and transferring to a Ltd co.?

by Readers Question

11:23 AM, 14th March 2019
About 2 weeks ago

Stamp and transferring to a Ltd co.?

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Stamp and transferring to a Ltd co.?

Hi, my son owns a flat that he’s now rented out as he had to relocate for work. He rents a flat in his new location, but he wants to buy and will have to pay the 3% stamp duty surcharge as it will be his second property.

Can he form a company and transfer the original flat into this newly formed company (with a view to adding further rental properties in future) and pay the standard company stamp duty, then purchase the new flat in his name to be his sole residence and only pay the basic stamp duty rate.

Many thanks

Dean



Comments

Neil Patterson

11:27 AM, 14th March 2019
About 2 weeks ago

Hi Dean,

'Selling' to a limited company must be done at market value and SDLT at the higher rate will be payable on the purchase by the limited company, even it is your first property purchase by the company.

There may also be a CGT liability if the property has increased in value.

Therefore this idea is unlikely to assist on the first BTL but may help for all future purchases.

Please see our tax planning page >> https://www.property118.com/tax/

Mark Alexander

11:41 AM, 14th March 2019
About 2 weeks ago

Hi Dean

The company he transfers the property into would have to pay the 3% additional rate, so some number crunching needs to be done to consider viability of that. Also, if he's been renting his former home for more than 18 months there might be some CGT to pay when he sells it to his company.

If the new property is worth considerably more than the previous one he might well be better off doing as you have suggested, but I cannot say without knowing the full facts.

sam

7:22 AM, 15th March 2019
About A week ago

My accountant says :
If u pay off the loan n transfer the property at nil value, provided the ltd co is in the same ownership structure as the current ones n no money changes hand, there is no SDLT involved.

I m dubious. Comments invited.

sam

7:24 AM, 15th March 2019
About A week ago

Reply to the comment left by Mark Alexander at 14/03/2019 - 11:41
Don’t forget the letting relief capped at £40k.

Mark Alexander

7:38 AM, 15th March 2019
About A week ago

Reply to the comment left by sam at 15/03/2019 - 07:22
Hi Sam

Your accountant is wrong, the transaction is treated as having occurred at market value for SDLT purposes on transfer to a Company, even if it is gifted at nil consideration.

Rico

16:37 PM, 15th March 2019
About A week ago

Reply to the comment left by Mark Alexander at 14/03/2019 - 11:41
Hi thanks for your replies.
His first property he has owned for 2 and a half years and paid £320k for it. It has been rented for 18 months. Its current value probably hasn't changed and is still worth more or less the same.
The new property he wants to buy is going to cost £605K.
I hope this clarifies his position further.


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