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Ltd company to avoid SDLT?

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adonis10
adonis10 Posts: 1,810 Forumite
Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
in Cutting tax
Scenario:

- own outright a 195k flat
- want to buy a house with my partner to live in and rent the flat out
- won't get it done by 31/3/16 so looking at other options

Set up ltd co, gift the flat to the company and use it to rent it out.

What are the tax implications?
«13456

Comments

  • anselld
    anselld Posts: 8,643 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    adonis10 wrote: »
    Scenario:

    - own outright a 195k flat
    - want to buy a house with my partner to live in and rent the flat out
    - won't get it done by 31/3/16 so looking at other options

    Set up ltd co, gift the flat to the company and use it to rent it out.

    What are the tax implications?

    The consultation document suggested there will be a method to make the first purchase of a residential property under Ltd Co subject to the new tax in order to close off avoidance by incorporation.

    It seems unlikely that the Gov would leave any other gaping loopholes. You are just going to have to bite the bullet an pay up (or sell the flat).
  • jimmo
    jimmo Posts: 2,287 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    A recent thread suggests that gifting the flat to your limited company will also attract SDLT.
    https://forums.moneysavingexpert.com/discussion/5342546
  • HappyMJ
    HappyMJ Posts: 21,115 Forumite
    10,000 Posts Combo Breaker
    adonis10 wrote: »
    Scenario:

    - own outright a 195k flat
    - want to buy a house with my partner to live in and rent the flat out
    - won't get it done by 31/3/16 so looking at other options

    Set up ltd co, gift the flat to the company and use it to rent it out.

    What are the tax implications?
    I'd gift the flat now to someone you trust 100% such as your parents.

    There's no SDLT to pay on gifts (but not to companies) which then allows you to buy a house without the SDLT surcharge.

    You'll have to think about the consequences though. If they need care the flat could be sold to pay for that care
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • adonis10
    adonis10 Posts: 1,810 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    HappyMJ wrote: »
    I'd gift the flat now to someone you trust 100% such as your parents.

    There's no SDLT to pay on gifts (but not to companies) which then allows you to buy a house without the SDLT surcharge.

    You'll have to think about the consequences though. If they need care the flat could be sold to pay for that care

    This is actually the latest idea, and probably the only workable one. Gifting to the parents is exactly what I'm thinking but, as you say, the care issue could screw everything.

    What about when they gift the flat back to me? CGT/SDLT become an issue?
  • HappyMJ
    HappyMJ Posts: 21,115 Forumite
    10,000 Posts Combo Breaker
    adonis10 wrote: »
    This is actually the latest idea, and probably the only workable one. Gifting to the parents is exactly what I'm thinking but, as you say, the care issue could screw everything.

    What about when they gift the flat back to me? CGT/SDLT become an issue?

    No just land registry costs each time.

    I'd leave it in their names for as long as possible.
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • adonis10
    adonis10 Posts: 1,810 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    HappyMJ wrote: »
    No just land registry costs each time.

    I'd leave it in their names for as long as possible.

    And I'm assuming it won't take too long to get it done?
  • HappyMJ
    HappyMJ Posts: 21,115 Forumite
    10,000 Posts Combo Breaker
    adonis10 wrote: »
    And I'm assuming it won't take too long to get it done?
    It doesn't take long for you to fill the form in and send it off. As there's no mortgage you don't need a conveyancer you can fill in TR1 and send it off.
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • adonis10
    adonis10 Posts: 1,810 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    HappyMJ wrote: »
    It doesn't take long for you to fill the form in and send it off. As there's no mortgage you don't need a conveyancer you can fill in TR1 and send it off.

    Seems too easy, surely our lovely government have measures to tackle thus?
  • Dead_keen
    Dead_keen Posts: 257 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    adonis10 wrote: »
    What about when they gift the flat back to me? CGT/SDLT become an issue?

    Sounds like there would still be the extra 3% SDLT for you when you buy your new home as they will be holding the flat on trust for you.

    I think your better bet is to respond to the consultation to say that the first home you buy should not have the 3% extra. So, for example, why should someone with one BTL buying a home have to pay the extra 3% but someone with 100 BTL's and a home will not (assuming they sell their old home).

    If you do go ahead with your silly idea, don't forget that CGT will apply to you as if you had sold it at market value and that it can have IHT implications for you and again for them (if they 'gift' it back to you later).
  • Dead_keen
    Dead_keen Posts: 257 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    adonis10 wrote: »
    Seems too easy, surely our lovely government have measures to tackle thus?

    You mean like this: http://www.legislation.gov.uk/ukpga/2003/14/section/95
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