Selling my Residential Home to a LTD

JamesandI

Hi all, 
I am in a bit of a dilemma and would like some advice. 
I currently own my house (no other properties) and have put in an offer for my next home. The seller would like me to complete within 8 weeks (probate) and does not want a chain. Given the current climate, there is little chance I will sell my current property so I have been looking into selling my current residential to a LTD so that i dont get hit by the massive additional SLDC (3% if I am forced to keep my current one - can finance the new one without selling the old one). 
I am pretty certain that i will not have to pay CGT as this is my current house (not an investment), but will i be forced to pay stamp duty for the 'sale' of my current property to by LTD? It still would work out cheaper to pay for both SDLC (selling my current house to my LTD and buying the new one at the lower SLDC rate), than paying the higher SLDC rate on my new property as a second home. 

I understand that Buy to Lets would need to pay SDLC, but is there a way in which i can transfer/gift my current home to a LTD and be exempt from SDLC?

Thanks, 
J

greatcrested

Who do you mean by 'LTD'?

One of the quick-buy companies? Search the forum for many previous threads.

Or a company you own?

The costs involved mean you'd be better off either reducing the price to sell fast, or paying the additional SDLT on your purchase and claiming it back when you sell later. See

Companies must pay the higher rates for any residential property they buy if the:

• property is £40,000 or more
• interest they buy is not subject to a lease which has more than 21 years left

If the property costs more than £500,000, the 15% higher threshold SDLT rate for corporate bodies may apply instead.

https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property#comp

[Deleted User]

JamesandI said:

Hi all, 
I am in a bit of a dilemma and would like some advice. 
I currently own my house (no other properties) and have put in an offer for my next home. The seller would like me to complete within 8 weeks (probate) and does not want a chain. Given the current climate, there is little chance I will sell my current property so I have been looking into selling my current residential to a LTD so that i dont get hit by the massive additional SLDC (3% if I am forced to keep my current one - can finance the new one without selling the old one). 
I am pretty certain that i will not have to pay CGT as this is my current house (not an investment), but will i be forced to pay stamp duty for the 'sale' of my current property to by LTD? It still would work out cheaper to pay for both SDLC (selling my current house to my LTD and buying the new one at the lower SLDC rate), than paying the higher SLDC rate on my new property as a second home. 

I understand that Buy to Lets would need to pay SDLC, but is there a way in which i can transfer/gift my current home to a LTD and be exempt from SDLC?

Thanks, 
J

I'm not sure how this will help save you money in the long run though.  As it stands you have 3 years in which to sell your current home after purchasing your new home in order to recover the additional SDLT paid.  You couldn't do that with a limited company and limited companies have to pay the higher rate of SDLT even if it is the first property the limited company is purchasing which the company wouldn't be able to claim a refund on further down the line.

Even if your current home is unencumbered and you transfer the property to "your" limited company for nothing the SDLT will apply based on the market rate of the property, and remember it will be at the higher rate.  This is because you are a "connected person" to the limited company purchasing the property and I'm fairly certain the higher rate will also apply to the purchase of your new home.

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#if-you-transfer-land-or-property-to-or-from-a-company

This is really @SDLT_Geek's area of expertise so hopefuly (s)he will be along to confirm but I think what you see as a way of getting round the higher rate of SDLT will actually end up costing you more.

princeofpounds

If you can, by far the best way to proceed is to buy the new property, sell the old one within three years and reclaim the higher rate stamp duty. Your post is a bit ambiguous - can you do this? Or do you need the money from your current property to finance the new purchase?

AdrianC

JamesandI said:

I currently own my house (no other properties) and have put in an offer for my next home. The seller would like me to complete within 8 weeks (probate) and does not want a chain. Given the current climate, there is little chance I will sell my current property so I have been looking into selling my current residential to a LTD so that i dont get hit by the massive additional SLDC (3% if I am forced to keep my current one - can finance the new one without selling the old one).

Who buys it is irrelevant - just that you've completed on the sale at the point of the SDLT return on the purchase.

Are you meaning a "buy-houses-quick-guv-no-questions-asked" company? If so, the sale price will be WAY below market value.

If it's a BtL purchaser, it's irrelevant whether he structures the purchase through a limited company or not. That's entirely the buyer's decision as to how they run their lettings business.

 SDLT, btw, Stamp Duty Land Tax.

I am pretty certain that i will not have to pay CGT as this is my current house (not an investment), but will i be forced to pay stamp duty for the 'sale' of my current property to by LTD?

SDLT is not paid on sale. It is paid on purchase.
The buyer of your old place pays it on the purchase of your old place.
You pay it on the purchase of your new place.

It still would work out cheaper to pay for both SDLC (selling my current house to my LTD and buying the new one at the lower SLDC rate), than paying the higher SLDC rate on my new property as a second home.

You know you can reclaim the +3% when you sell the previous property within three years? So, no, it won't be cheaper to take a hit on the price. And I very much doubt we'd be talking about that small a hit, either.

I understand that Buy to Lets would need to pay SDLC, but is there a way in which i can transfer/gift my current home to a LTD and be exempt from SDLC?

I presume you totally innocently forgot to add "...and in return, they'll gift me a sum of money that's remarkably similar to the value of the house but totally unrelated, obvs."...? Because giving a house away completely would definitely be a strange way to avoid a relatively small tax bill.

Or, to put it another way...
"Can I lie to the taxman in order to pay less tax than I'm legally required to?"

Go on, what do you think?

csgohan4

greatcrested said:

Who do you mean by 'LTD'?

One of the quick-buy companies? Search the forum for many previous threads.

Or a company you own?

The costs involved mean you'd be better off either reducing the price to sell fast, or paying the additional SDLT on your purchase and claiming it back when you sell later. See

Companies must pay the higher rates for any residential property they buy if the:

• property is £40,000 or more
• interest they buy is not subject to a lease which has more than 21 years left

If the property costs more than £500,000, the 15% higher threshold SDLT rate for corporate bodies may apply instead.

https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property#comp

15% may not be applicable if using the company as a rental business but quite clear in the link. 

SDLT_Geek

The way I read the original post is that OP intends to sell their own home to their own limited company so that when they come personally to buy a new home, they can properly say they do not own any other properties. That strategy can work to escape the 3% surcharge on the new property.

The limited company would pay SDLT based on the market value of the old home acquired, with the extra 3% surcharge. This could still work out as less SDLT overall if the new home being bought is worth very much more than the old home.

If the old home is worth more than £500,000 then issues about whether the company has to pay the 15% flat rate on its acquisition of the old home come into play.