Is this a purchase or remortgage?

vectistim

OK, that sounds a slightly silly question as it should be obvious, but bear with me.

If I have 100% control of a company which owns a property and want to transfer it to personal rather than company ownership, will lenders treat this as a purchase or remortgage?

The difference between the two being that a remortgage wouldn't require a deposit, wheareas theoretically the purchase would, unless the lender accepted a gifted deposit. Apart from a little bit in a bank account the property is the company's only asset, and after the transfer would be closed down.

ie: In converting ownership from company to personal the company's mortgage will need replacing with a personal one. What's the best approach?

Thrugelmir

Have you examined the tax implications of the Company disposing of the asset? A sale to a related party would interest the HMRC. As it needs to be conducted at fair market value.

holly_hobby

The company is in effect its own little entity (even though you may be 1 of the controlling directors), and holds title (ie registgered with LR as the owner) for the property.

As such, this is a purchase, as you are purchasing an asset of the company from the company with change of legal ownership from it to you.

The way to get around the deposit issue, would be see if the lender will accept this under a sort of Family Discounted Pch arrangement - which is that although the property is valued at one figure - it is selling to you for a reduced figure, the difference acting as the deposit. ie valued at 200k, selling to you for 150k = 50k deposit.

HOWEVER (and if the other controlling directors/sholders agree to this) the exercise will cause issues with regards to your company accounts, and the sale of assets at under value (as I don't think you'll get away with too much depreciation on a property) - esp if this sale is the prequel to the company starting winding up procedures ....

It may be worth floating this past your accountant and/or HMRC to establish what the trading implications will be, and also a mge broker to see if once he explains the pch arrangment to the lender, if he can swing them to view it along the lines of Discounted Family/Connected Purchase (which is the tack I would take if I were trying to place this)

But yes to answer the original Q you posed, this is officially classed as a purchase ....

Hope this helps

Holly

amnblog

You should speak to your accountant in the first instance.

Previous poster has hit on a major issue that HMRC won't like disposal below market value.

vectistim

Thank you, for the various responses. The family discount type approach looks like it will be the way to go (unless we capital raise on other properties).

Yes, I'm looking into the tax situation, but that shouldn't be too much of an issue.

Thrugelmir

vectistim wrote: »

Thank you, for the various responses. The family discount type approach looks like it will be the way to go (unless we capital raise on other properties).

Sale of a company asset to a connected party is treated at Open Market Value for tax purposes irrespective of the consideration paid and recorded in the Company accounts. .

holly_hobby

As I mentioned in my earlier post, with regards to your company trading figs, the sale of the asset at under value. (which you are aiming will hopefully qualify your residential mge application under disounted pch considersation with lenders), will certainly cause issues if the company is to be wound up under any administration order (which will be invoked, and as you are a connected party, if any order should occur within 2 yrs of the sale/transfer).

As I said in my first post, if the pch of this asset is the prequel to any winding up exercise which you know to be on the horizon ... it would do you well to familirise yourself with S238 Insolvency Act 1986 - Transactions at Undervalue - before you start anything rolling !

To which if found in breach, the courts can effectively reverse the transaction (sale)/transfer of company asset.

If you elect to fund the deposit yourself, to keep things simple, ensure that the company has the asset independently valued by a RICS surveyor - the result of which can be presented by the Co to illustrate the transaction was conducted as a std sale & pch exercise, if and when reqd.

Hope this helps

Holly