Putting a rental property into a Ltd Company.

Red_car_beach

Hi all, im moving home (main residence) but have a rental property with no mortgage that i want to keep. The rental is currently worth about 180k, far far lower than the new main residence I'm purchasing..

1-will I have to pay the higher rate stamp duty as a result of owning 2 houses? Which i technically can't claim back?
2-if the rental is put into a Ltd Company, with me as the director prior to the main residence purchase, I'd have to sell the property from myself to the company?. Do I therefore pay CGT on the difference of the rentals original purchased price (over 125,000) to its market value now? 
3-Does the Ltd company (me as director) then also pay Stamp duty on that rental property purchase, as if you are an individual buying the property, solicitors fees for transfer of ownership, and I think there is also a surcharge to pay? 

Basically, the higher rate stamp duty on the main residence is far far higher than if I only owned 1 property (a difference of 33k). By selling the rental to my Ltd company, the price of which is far lower than the new main residential, im trying to be tax efficient. 

Is there anything else ive missed/could full foul of please?? 

MyRealNameToo

1) Yes

2) You have to sell the house to the company at fair market value. As a corporate entity owning a residential property it will have to pay Stamp on buying the property with the higher rate. There is no CGT as its your main residence until the point of sale

3) Yes, the company pays stamp inc the extra for it being a company buying a house 

Do you have a company with sufficient funds to buy the house at fair market value and pay the stamp duty on it? Will it need a commercial mortgage? 

anselld

It is not clear.  Are you selling your current main residence? 

MyRealNameToo

anselld said:

It is not clear.  Are you selling your current main residence? 

They are proposing to either keep it themselves as a rental or sell it to their own limited company. 

anselld

MyRealNameToo said:

anselld said:

It is not clear.  Are you selling your current main residence? 

They are proposing to either keep it themselves as a rental or sell it to their own limited company. 

That’s not how it reads to me.  The first sentence suggests they are changing their main residence *and* retaining an existing rental in which case additional SDLT would not be required.

Red_car_beach

I'm selling my main residence and buying a new home. I'm moving home, a straight forward moving home, until the rental is added to the mix, the higher rate stamp duty is 57k, lower rate would be 24k, so a 33k difference. I'm trying to work out, if putting my rental, currently worth 175k into a limited Company is more tax efficient. ATM I don't have the Ltd company set up & we are about 2 months off completion on the main residence, so need to act. Thank you

user1977

As above if you're replacing your main residence (i.e. selling one and buying another simultaneously) then the rental doesn't affect the SDLT on your purchase. You'd only pay the higher rate if you were increasing the number of properties you own.

Red_car_beach

but I own the rental, so is the purchase of my new main residence not classed as a 2nd home? There is also the small issue of completing on the new home about 4 weeks before the current main residence is sold, so for about 4 weeks, I'll technically own 3 properties. So am I right in saying that I'll initially have to pay the higher rate SDLT, but can claim it back once. Does this apply if all the while there is a rental owned in my own name? 

saajan_12

Red_car_beach said:

Hi all, im moving home (main residence) but have a rental property with no mortgage that i want to keep. The rental is currently worth about 180k, far far lower than the new main residence I'm purchasing..

1-will I have to pay the higher rate stamp duty as a result of owning 2 houses? Which i technically can't claim back?
 

If you're replacing your main residence (moving out of and selling old main residence, buying and moving into new main residence) on the same date then the higher rate SDLT is NOT due. If there's a gap then you may have to pay and claim it back. 

MyRealNameToo said:

1) Yes

2) You have to sell the house to the company at fair market value. As a corporate entity owning a residential property it will have to pay Stamp on buying the property with the higher rate. There is no CGT as its your main residence until the point of sale

3) Yes, the company pays stamp inc the extra for it being a company buying a house 

Do you have a company with sufficient funds to buy the house at fair market value and pay the stamp duty on it? Will it need a commercial mortgage? 

No - for OP's CGT purposes, the sale would be treated as if at market value. However the company doesn't have to pay in full for it, you can gift a property to the company. This may not be a good idea as you then have extra assets in the company, and can't get them back out in the future without paying another tax, but it is possible. 

Whatever the company does pay would be liable for stamp duty at the higher rate. 

anselld

Red_car_beach said:

but I own the rental, so is the purchase of my new main residence not classed as a 2nd home? There is also the small issue of completing on the new home about 4 weeks before the current main residence is sold, so for about 4 weeks, I'll technically own 3 properties. So am I right in saying that I'll initially have to pay the higher rate SDLT, but can claim it back once. Does this apply if all the while there is a rental owned in my own name? 

Yes if there is a four week delay between buying and selling then you pay the extra and then claim it back when you complete the sale.  Yes you can have another rental all the while so long as you  are buying and selling main residence.