Transfter property into ltd company - refund on higher rate SDLT?

Parisii

I rented out my former home when I bought my current home and so paid the higher rate of SDLT. If I transfer my now rental property into a limited company is this an arm's length disposal of the previous main residence to get a refund on the higher rate of SDLT?


There is no mortgage on the rental property and no capital gains is payable due to residence relief so it would be worth doing even though the company would pay SDLT on the purchase.


My accountant couldn't answer the question and I can't find anything online that specifically covers this scenario so if anyone can point me in the direction of any guidance I would be grateful.

DoctorStrange

I believe that all purchases by a non-natural person (i.e. your company) are subject to the ADS rules so even if you did qualify for a refund, you'd just be paying it out again.

Parisii

thanks for your reply, could you tell me what ADS is?

Parisii

Does it only apply in Scotland? None of the properties are in Scotland.

DoctorStrange

Sorry, yes ADS is the Scottish equivalent of the higher rate SDLT, but I think the rules are very similar regarding companies buying property

Parisii

This would be the company's only property so my understanding is that only the usual rate of SDLT is applicable rather than the higher rate.

00ec25

Parisii wrote: »

This would be the company's only property so my understanding is that only the usual rate of SDLT is applicable rather than the higher rate.

your understanding is incorrect
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09835


https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property#trusts-companies-and-partnerships


Companies
The higher rates will apply to the purchase of major interests in one or more dwellings by a company, if Conditions A and B are met in respect of at least one of the dwellings [Paras 4 and 7]:

• Condition A - the dwelling is purchased for chargeable consideration of £40,000 or more;
• Condition B - the dwelling is not subject to a lease which has more than 21 years to run on the date of purchase;

If none of the interests in dwellings meet both Conditions A and B then the higher rates will not apply to the purchase.




As for your idea about having grounds to claim a refund, no, purchase by a close company is not an arms length transaction since you control the company's decision to buy and how much it will pay

Parisii

I'm not sure I completely understand what those conditions mean, does that mean that all companies pay higher rate on any property purchase over £40k?

00ec25

Parisii wrote: »

I'm not sure I completely understand what those conditions mean, does that mean that all companies pay higher rate on any property purchase over £40k?

yes it does, That is the whole point of them, to prevent people using a company to evade higher rate


have you read the rest of the links?

unholyangel

OP, whats the reason for transferring to a limited company?

You've already considered stamp duty on the company acquiring the property. But have you considered tax implications when it comes time to dispose (sell or transfer) the property back out of the company?

Parisii

Right, I need to factor that in then but my current home is still worth a lot more than the rental property so even with the company paying the higher rate of SDLT it would be worth it to claim the refund on the higher rate paid on my current property. Is that allowed?