Selling existing home to Own Ltd Company to generate cash for deposit

AK_MSE

Hi, 
In order to to release money from my Software Ltd company ,  a mortgage advisor suggested the following to me. Can you please suggest if this makes financial sense?
Our House worth ~ 500K
Ltd company A (deals with software's) 
Ltd Company B (SPV which deals with Properties)
Ltd Company A lends money (200k) to Ltd Company B.
I sell my house (worth 500K) to Ltd Company B. 
Ltd Company B takes a mortgage of 300K (plus has 200K already) and pays me 500K for the property.
I (individual) receive 500K for my house which i use to pay off my mortgage and keep the rest Tax free. thereby saving me:
a) Any dividend tax that i would have to otherwise pay to release money from Ltd Company A.
b) Ltd Company pays no Stamp duty (SDLT holiday untill 30 june)
c) No CGT as its my main residence Sale.
d)  I can then use this surplus money to but a new house without SDLT.

Please share your views.


 

SpiderLegs

Are you quite sure about b?

K_S

@ak_mse That's one brave mortgage advisor who's given you all this accounting advice!

My 2c -

- I have seen clients loan money to their SPV to use for a property purchase, from their trading ltd. co. so presume that it's doable in principle. 

- I have had clients "sell" their current residence to their SPV (who buys it using a ltd co mortgage) and use the net cash raised for an personal onward purchase. In effect a company let to buy. "Selling" a rental property in their own name to their SPV is very common.

- The SPV will have to pay SDLT surcharge of 3% even if the property is £500k.

- no comment on the tax implications etc of your specific scenario.

AK_MSE

SpiderLegs said:

Are you quite sure about b?

Not 100% but thats what he said. Is the SDLT holiday not for company purchases?

K_S

AK_MSE said:

SpiderLegs said:

Are you quite sure about b?

Not 100% but thats what he said. Is the SDLT holiday not for company purchases?

@ak_mse It is. But the 3% surcharge still applies.

greatcrested

I googled (well, duckduckgo'ed ) "sdlt holida ltd companies" and the first return showed:

The temporary rates effectively replace first time buyers relief but are not limited to those buying their first home. In fact, the saving is not restricted to those who are purchasing their own home as equivalent reductions are also available to companies and individuals who are buying as landlords.

https://www.pem.co.uk/article/sdlt-holiday-individuals-companies/

Companies and individuals not falling within the rates above

SDLT_Geek

The 3% SDLT surcharge applies to the acquisition by the company .....  unless the 15% flat rate applies!  That could apply if the property is in fact worth over £500k.  There are some reliefs from the 15% rate.  These get you down to the 3% surcharged rates.  There are traps with the reliefs.

davidmcn

Besides, your ultimate purchase is presumably only going to be SDLT - free if you complete before the end of June. Does that seem likely? 

AK_MSE

davidmcn said:

Besides, your ultimate purchase is presumably only going to be SDLT - free if you complete before the end of June. Does that seem likely? 

thats the temptation! If this works out it would be a great incentive to do this quickly.

AdrianC

If you can throw that much money about between your own limited companies, then I assume you already work with an accountant. What did they say?

GDB2222

You have not mentioned the tax implications of living in a home owned by the limited company, if any.