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  • FIRST POST
    • danfitzjohn
    • By danfitzjohn 18th Apr 17, 9:24 PM
    • 20Posts
    • 2Thanks
    danfitzjohn
    Expat landlord returned to the UK - tax advice
    • #1
    • 18th Apr 17, 9:24 PM
    Expat landlord returned to the UK - tax advice 18th Apr 17 at 9:24 PM
    Hello,


    Have recently returned to the UK to work after 8 years working abroad. We have 3 buy to lets with no mortgages with a combined income circa £1,700 per month across the properties.


    I will be working and taxed at the higher rate income whereas my wife will not work for the foreseeable future (approx. next 3 years)


    So the questions I have are:


    1) Is it worthwhile transferring the titles all into my wifes name for tax reasons?
    2) Is it worth taking out mortgages on the properties to create some debt so as to show expenditure on the houses? I could use the capital to fund our own house purchase..
    3) Would it be worthwhile setting up a company to put the 3 houses in?


    Any advice would be appreciated as I'm a bit rusty on the latest rules!


    Many thanks


    Daniel
Page 1
    • deannatrois
    • By deannatrois 18th Apr 17, 9:38 PM
    • 4,575 Posts
    • 6,408 Thanks
    deannatrois
    • #2
    • 18th Apr 17, 9:38 PM
    • #2
    • 18th Apr 17, 9:38 PM
    I really do think it might be best to see an accountant given your income. Could save you a fortune. People on here are brilliant, but don't always have the same expertise.
    • Pixie5740
    • By Pixie5740 18th Apr 17, 9:45 PM
    • 9,878 Posts
    • 13,485 Thanks
    Pixie5740
    • #3
    • 18th Apr 17, 9:45 PM
    • #3
    • 18th Apr 17, 9:45 PM
    1) Possibly or you could own them as 99:1 tenants in common with your wide being the 99.

    2) It's not worth paying interest just to save a bit of tax. You'll pay out more than you'll save especially as a higher rate tax payer.

    3) Doubt it. You'd pay Capital Gains Tax when you sell the properties to the limited company. The limited company will then pay Stamp Duty Land Tax with the additional 3%.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • G_M
    • By G_M 18th Apr 17, 9:52 PM
    • 38,840 Posts
    • 44,058 Thanks
    G_M
    • #4
    • 18th Apr 17, 9:52 PM
    • #4
    • 18th Apr 17, 9:52 PM
    Who's been paying the tax for the last 8 years? You, your agent, your tenants, or your accountant?
    • danfitzjohn
    • By danfitzjohn 18th Apr 17, 10:34 PM
    • 20 Posts
    • 2 Thanks
    danfitzjohn
    • #5
    • 18th Apr 17, 10:34 PM
    • #5
    • 18th Apr 17, 10:34 PM
    Hi,

    The simple answer is no one has been paying tax as 1 property each and 1 joint means the individual income has been below tax threshold for offshore landlord
    • eggha
    • By eggha 19th Apr 17, 2:29 AM
    • 233 Posts
    • 196 Thanks
    eggha
    • #6
    • 19th Apr 17, 2:29 AM
    • #6
    • 19th Apr 17, 2:29 AM
    don't let the tax tail wag the dog...
    1) Is it worthwhile transferring the titles all into my wifes name for tax reasons?
    Originally posted by danfitzjohn
    in principle yes, however, were any of the properties your main residence before you got married ? If yes then she will not inherit your claim to private residence relief and so there would be capital gains tax implications for transferring a property where PRR is lost. In the latter case retaining joint ownership would be efficient as it would preserve your PRR claim, but ownership must be as tenants in common with, as suggested above, an unequal share split favouring her. That will then need to be supported by a declaration of trust and a Form 17 submitted to HMRC.

    If you do however transfer them into her sole name, be careful that when "you" decide to sell up if she transfers it back into joint names (the idea being to maximise CGT allowances) make sure she does that well in advance (eg 1 year) of the sale or the transfer will be ignored as it falls foul of anti tax avoidance rules

    2) Is it worth taking out mortgages on the properties to create some debt so as to show expenditure on the houses? I could use the capital to fund our own house purchase..
    Originally posted by danfitzjohn
    what do you think expenditure proves???? paying interest on a loan in order to create a cost to offset against tax is madness if the interest is more than the tax offset

    as a higher rate taxpayer it is also now very inefficient for you to have a loan because interest rate relief is now capped at basic rate 20% and you are taxed on the rental income before deduction of interest charges so your total income will be markedly higher than it used to be and, depending on the figures, with 3 properties it is very possible you may actually tip over into making an overall loss

    borrowing against one or more of the properties to realise cash to fund purchase of your main home is still allowed but obviously you need to number crunch the respective interest rates to see if that is worthwhile. A residential mortgage rate should be lower than a BTL rate but when you add in the tax "saving" available on the BTL mortgage (bit not the residential mortgage) it may turn out it would be cost effective to fund the home purchase by rental business borrowing...

    3) Would it be worthwhile setting up a company to put the 3 houses in?
    Originally posted by danfitzjohn
    almost certainly not.

    The company will need to fund the purchases of the properties from you. From whom and at what rate is it going to access lending for a newly formed company? Any lender would almost certainly require a directors guarantee to secure the borrowing so that means your residential house is then at risk. The company would pay SDLT on the purchase of the properties from you and at full market value since it is not an arms length relationship and so must use market value. You would also be making a disposal for CGT purposes so would have to pay the CGT due when you sell to the company.

    whilst it remains true that you would pay less tax when you take money out of the company (20% corporation tax and 32.5% on your dividend) compared to paying the simple 40% income tax of the higher rate taxpayer you are, the fact remains that you have an insignificant rental portfolio if it grosses only £1,700 in total for 3 properties so the additional costs of operating a company may well absorb the tax saving anyway

    The simple answer is no one has been paying tax as 1 property each and 1 joint means the individual income has been below tax threshold for offshore landlord
    Originally posted by danfitzjohn
    1,700 x 12 = 20,400 split 50/50? = 10,200 each, so sailing a bit close to the income tax personal allowance !
    Last edited by eggha; 19-04-2017 at 2:39 AM.
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