Property fully owned into a limited company

jamescooper244

Hello,

I have a property fully owned by myself.

I want to transfer it into a limited company and the business thereby will have a loan against me to the market value of the property at the time. I will then be able to extract money from the company, paying back the loan it owes me - a solicitor confirms I can do this.

A question I do not know is would I be able to charge the company interest on this loan (essentially if it had a mortgage against me) and if so, at what rate and how is this determined?

Many thanks for any guidance.

Kind regards.

TripleH

Yes, you can charge interest on a loan owed to you by your company, most people don't do it but nothing to stop you.

There are guideline rates set by HMRC but my understanding is that you can charge whatever rate you want.

Please note, that you will have to pay tax on the interest you earn, even if you don't receive any money until the property is sold to another party.

You will also have to pay capital gains tax on the difference between what the company bought the property for and the sale price.

I believe there are rules about you selling the property at above market rate to a company you own as well (house worth 300K, you sell for 500K to avoid capital gains tax won't work).

SDLT_Geek

jamescooper244 said:

Hello,

I have a property fully owned by myself.

I want to transfer it into a limited company and the business thereby will have a loan against me to the market value of the property at the time. I will then be able to extract money from the company, paying back the loan it owes me - a solicitor confirms I can do this.

A question I do not know is would I be able to charge the company interest on this loan (essentially if it had a mortgage against me) and if so, at what rate and how is this determined?

Many thanks for any guidance.

Kind regards.

I expect you have thought of the stamp duty the company will pay.  If the property is in England the relevant tax is stamp duty land tax. 

The company will pay SDLT on the higher of what it pays for the property and the market value of the property.  The extra 3% SDLT will also be due.  The SDLT could be much higher if the property is worth over £500,000.

Keep_pedalling

Assuming this is not your home you may also have a CGT liability on the transfer.

Schwarzwald

jamescooper244 said:

Hello,

I have a property fully owned by myself.

I want to transfer it into a limited company and the business thereby will have a loan against me to the market value of the property at the time. I will then be able to extract money from the company, paying back the loan it owes me - a solicitor confirms I can do this.

A question I do not know is would I be able to charge the company interest on this loan (essentially if it had a mortgage against me) and if so, at what rate and how is this determined?

Many thanks for any guidance.

Kind regards.

usually these loans shall be set at arm's length, ie the rate at which a 3rd party lender would provide the mortgage to you. say you could lend a 75% mortgage for this property at 5-6% for 2 years fixed ... then this should be the approximate interest that the business would charge you (note: it would need to pay tax on such income generated)

but other question: what are you trying to achieve by doing this?
are you living in the property at the moment?
i presume there is no existing motgage on the property right now?

silvercar

So after however long, the money is out of the company tax free and the property is in the company. Then what? And the costs of doing so are the CGT you pay on sale to the company, the SDLT the company pays on the purchase of the property.

Mgman1965

Also remember that as a LTD company asset, if the company goes bust it will be seized by the OR and you lose your home.