Using the stamp duty holiday to move personal BTL to company

jamielutz1987

My broker suggested that I may want to take advantage of the stamp duty holiday to look at options to move the one BTL property that we have in our personal names to my company SPV.

It's a property that we used to live in when in London. Even after the recent BTL tax-reforms it's still quite profitable but would further benefit from being put inside a ltd. co. Unfortunately with the SDLT that would be payable upon incorporating the the property, it was never worth doing that. However, now that the threshold has gone up to 500k, the SDLT payable goes down by almost 50%.

Plus, I am completing on a residential purchase (moving from rented) next week so "selling" the London BTL property to the Ltd Co. should mean that I can apply for a refund of the 3% SDLT surcharge that I'm paying on my residential purchase as the property being transferred used to be my main residence. That would be a bonus.

All in all, it seems like a low cost way to move the property off my personal name and into the ltd co.

I might be missing something obvious and it be great if someone could point out anything I might have missed.

The CGT gain (after adjusting for time period that we lived in the property) should be no more than 20-25k so shouldn't exceed our thresholds. The broker did say that moving a mortgaged BTL property from individual names to company is slightly convoluted and will involve expenses like accountant fees, etc.

davidmcn

jamielutz1987 said:

I might be missing something obvious and it be great if someone could point out anything I might have missed.

The changes announced on Wednesday don't change the amount of SDLT payable on purchases by limited companies - not sure if you/your broker thought they do?

jamielutz1987

@davidmcn Yeah that's what he said. He said you still pay the 3% surcharge but since my property is just under 500k that's all I'll have to pay, almost halving the bill.

davidmcn said:

jamielutz1987 said:

I might be missing something obvious and it be great if someone could point out anything I might have missed.

The changes announced on Wednesday don't change the amount of SDLT payable on purchases by limited companies - not sure if you/your broker thought they do?

jamielutz1987

@davidmcn This is from an article that my broker shared with me. It definitely suggests that company BTLs will also benefit from the SDLT holiday.

MaddyHale

I am in the process of remortgaging my BTL and buying a new personal residence. I was thinking of moving my BTL to a Ltd Company. Three things stood out for me.

1. The cost of Stamp Duty and CGT
2. The higher mortgage interest rate
3. The added complexity of Ltd Co accounts with the potential of quarterly CT61s and increased accountancy costs

In the end, it didn't add up for me. If I leave  the BTL in my name, I continue receiving income as I do now. No change. If I move it to a Ltd Co structure, it will take me over 3 years (This is with the Stamp duty Holiday factored in) to recoup the Company set up costs.

jamielutz1987

MaddyHale said:

I am in the process of remortgaging my BTL and buying a new personal residence. I was thinking of moving my BTL to a Ltd Company. Three things stood out for me.

1. The cost of Stamp Duty and CGT
2. The higher mortgage interest rate
3. The added complexity of Ltd Co accounts with the potential of quarterly CT61s and increased accountancy costs

In the end, it didn't add up for me. If I leave  the BTL in my name, I continue receiving income as I do now. No change. If I move it to a Ltd Co structure, it will take me over 3 years (This is with the Stamp duty Holiday factored in) to recoup the Company set up costs.

Thanks @Maddyhale, the way you have put it is really helpful.

Thankfully for us a lot of those don't appear to be significant issues. There's no CGT as the gain will be within our combined capital gains allowance. The net SDLT will be around 3-4k as the transfer will trigger a refund of the SDLT we are paying for the property currently being purchased. And we already have an operational ltd co spv so any accounting costs will only be incremental. I have a really good broker and he estimated that my interest costs will increase by about about double but with the size of the mortgage, ability to offset interest payments and the lower tax rates, it evens out overall. I looked at the additional one-time costs and it will take the property about 6 months of net profit to recover them which isn't ideal but not too bad.

The primary aspect stopping us is the fact that we will lose a personally owned property in London that we could return to. Once it's in a company, that option is closed off.

Sibbers123

You say you lived in the property? Where are you living now? Another property you own?

if so, you won’t get the SDLT refund as you aren’t disposing of your main residence.

jamielutz1987

@Sibbers123 We are renting currently.

From what I understand the property should have been our primary residence at some point in the three years preceding the purchase of the new house. We last lived in the London property in autumn 2017 so meet that condition.

jamielutz1987

davidmcn said:

jamielutz1987 said:

I might be missing something obvious and it be great if someone could point out anything I might have missed.

The changes announced on Wednesday don't change the amount of SDLT payable on purchases by limited companies - not sure if you/your broker thought they do?

@davidmcn Just got clear confirmation from my broker that the SDLT changes do indeed apply to ltd co BTL purchases as well!

Apparently quite a few of his landlord clients are going ahead with similar moves to take advantage of the SDLT holiday.

SDLT_Geek

These issues are addressed briefly in this blog: https://www.blakemorgan.co.uk/stamp-duty-land-tax-holiday/ https://www.blakemorgan.co.uk/stamp-duty-land-tax-holiday/  Yes, purchases by companies benefit from the temporary reduction, though still suffer the 3% surcharge on market value.  There are traps to look out for if the property is worth over £500,000.

MaddyHale

@jamielutz1987 Fantastic that moving to the Ltd Co option doesn't have huge overheads for you. The rental yield must be really good. At the end of the day, if the property pays for itself and gives you income on the side, its all good.