Stamp Duty, Second Homes and Bodies Corporate

da_rule

If an incorporated company owns a domestic property (so essentially a company set up to manage someones property portfolio) and then buys a second property they will pay the higher rate for additional properties.

My question is, what's to stop someone just creating a new company every time they want to buy another property? Obviously there's the time to set the company up and deal with the profits etc.

I was reading an article highlighting this potential 'loop hole' and it mentioned that they expected it to be closed in the Autumn Statement (2016) by making all domestic property purchases by limited companies subject to the higher rate. I cannot see that this actually happened, does anyone know if it did?

davidmcn

da_rule wrote: »

If an incorporated company owns a domestic property (so essentially a company set up to manage someones property portfolio) and then buys a second property they will pay the higher rate for additional properties.

Yes, but they also pay it on the first property. Read paragraph 5.1 of the guidance note here.

I was reading an article highlighting this potential 'loop hole' and it mentioned that they expected it to be closed in the Autumn Statement (2016) by making all domestic property purchases by limited companies subject to the higher rate. I cannot see that this actually happened, does anyone know if it did?

What article? As far as I know there was no such loophole (unless it was just something pointed out during the consultation process).

silvercar

Advantage of a company is that any mortgage interest is fully allowable as an expense, rather than restricted to basic rate relief as it will be for individuals.

booksurr

silvercar wrote: »

Advantage of a company is that any mortgage interest is fully allowable as an expense, rather than restricted to basic rate relief as it will be for individuals.

you have possibly misunderstood, interest remains an allowable item but it is not the amount of interest itself which is capped, it is the tax relief on that interest which is capped at 20% for a higher rate taxpayer.

a company pays corporation tax not income tax. The CT rate is currently 20% so the net effect is the same, all interest gets relief at 20% for both a company and an individual (higher rate) taxpayer.

Of course when CT reduces to 19% in April 2017 and to 18% in April 2020 the comparison will then be different....

anselld

booksurr wrote: »

. The CT rate is currently 20% so the net effect is the same, all interest gets relief at 20% for both a company and an individual (higher rate) taxpayer.

That is the George Osbourne argument.

However, a higher rate tax payer with a large mortgage could well suffer a net loss after tax under the new rules. Whereas the same tax payer with the same mortgage via Ltd Co would still make a profit even after suffering CT at 20% and IT at 32.5% on dividend extraction.

So they are not the same.