Why more landlords and property investors are incorporating

No it’s simple – most BTL deals do not stack up unless the purchase is made with a Ltd Co.

S24 has caused so much damage….

This is too surface level. Delve a little deeper you’ll find a lot of incumbent BTL landlords incorporating because they’re forced to as rising rents and static tax bands put them into higher rate and they’re effectively taxed on their turnover. The majority are incorporating out of necessity not because of grand strategic planning.

Can anyone recommend any independent reading material highlighting the potential costs and benefits of incorporation?

A good question, Chris. A pros and cons list would be helpful with both buying new property and transferring existing

Reply to the comment left by Neilt at 31/03/2025 – 12:53
I love reading other landlords experiences and how you all deal with them. With regard the pros and cons of transferring your properties the obvious pro is interest relief on BTL Mortgages and lower tax regime. Having property in both for the last 30 years I see both sides and it really has moved against us landlords?
To transfer you are faced with the prospect of a remortgage if the property has a BTL mortgage, then 5% stamp duty and if you’ve owned the property for a long period you need to transfer at market value which could trigger capital gains to boot.
If however you manage your own properties and can prove you spend over 20 hours a week doing so there are ways of avoiding .
Sorry for the massive post but this is info I’d researched last year and sent to my accountant for advice. I couldn’t find the web links to the articles so posted them in full sorry. Hope they are useful
CGT Treatment When Transferring Property Into a Limited Company
Capital gains tax (CGT) is levied when an asset which has gained in value is disposed of. When transferring a property from an individual’s ownership into a limited company with essentially the same ultimate owner you might expect an exemption to exist to allow for this change in business structure.

If a current business has property in it, you might consider moving these properties into a limited company in order to benefit from the lower tax rates and less tax restrictions. Unfortunately, if you do so then the transfer and change of ownership will be deemed as a disposal and a new acquisition at the current market value. However, there is an incorporation relief available, under specific conditions, that will allow the gain to be deferred, rolled into the base cost of the shares and in exchange for the properties themselves. This is a deferral and not an exemption.

One of the conditions is that all the properties of the current trade, being the rental business, are transferred into the limited company. This could trigger taxes due to complexities with the current tenant or family relationships with the properties.

One other condition is that the business needs to be classed as a trading business and not simply as an investment business. Under case law in the case of Ramsay v HMRC (2013) the amount of time spent on the business to allow it to be considered a trade is 20 hours per week. Therefore, the larger the portfolio where the owners undertake most of the management and other activities it will be easier to argue this criterion is met. Similarly, where a smaller portfolio is held, and the majority of the activities have been redeveloping the property over several months or years which involved the owners themselves then you have a better chance of meeting this criterion.

Importantly, all of the current debt on the properties need to be novated on transfer into the limited company and not just repaid with new debt otherwise the relief is not permitted.

When the net asset value of the property business is less than the gain being rolled into the shares then there is a crystallisation of a liability and this will trigger an immediate taxable gain on this portion. Therefore, it is important to undertake an independent asset valuation and tax valuation during this process.

SDLT Treatment When Transferring Property Into a Limited Company
SDLT is levied when a land or property asset is purchased. When transferring a property from your ownership into a limited company this will be deemed a disposal and new purchase. You may believe that since the ultimate owner will still be the same that you might expect an exemption to exist to allow for this change in business structure.

As mentioned above, SDLT will normally be charged on the transfer into a company and also the 3% surcharge will be applicable to most landlords doing so, especially those seeking incorporation relief. The recent reduction in SDLT until 31 March 2020 (unless it will be extended) means that although most property purchases up to £500,000 will no longer pay CGT, saving £15,000 at that valuation or higher, additional property purchases will still pay the 3% surcharge from the first pound as previously.

One exception to SDLT being charged is when transferring property from a trading partnership into a limited company. Under Finance Act 2003 Schedule 13, SDLT will get 100% relief and not be charged but consideration needs to be had about whether the partnership is trading. It will not be possible to move the property from a sole trade into a partnership first and then into a company since the first step would attract SDLT at that point. However, this cost may be acceptable when compared with the overall tax savings that a Corporate Vehicle may achieve. It is important to be able to prove the partnership existed with evidence on tax returns, banking statements, the mortgages and other areas.

For timings considerations, if the partnership itself was exempt from SDLT at the point of its incorporation then there will be a SDLT clawback if you withdraw capital from a partnership within three years of land or property being added to it.