Transferring of Properties into Limited Companies
If you are a landlord and considering transferring your properties into a limited company, then you have come to the right specialist tax advisory firm.
We are one of the leading tax advisory firms in the UK offering bespoke tax advice on incorporation or transferring of properties into limited companies.
At Churchill Tax, our specialist tax advisers and tax consultants can provide you with all the information and tax advice you require to make the right decision about transferring your property portfolio into a limited company. We can give you detailed information about how the legislation and HMRC operate on this area and how the courts have decided when these cases have been tested in the Tax Tribunal.
Before you consider the transferring properties into a limited company, you will need to consider the following:
If you have a large mortgage on your rental properties and are a higher rate tax payer, then you will be affected by section 24 rules. These rules means that you will not be able to get tax relief at the higher rate for mortgage interest. This means that your effective tax rate will be much higher than 40%. The section 24 restriction only applies to individuals and not to limited companies. By transferring your properties into a limited company, you can get full tax relief on the mortgage interest.
By transferring your properties into a limited company, you can potentially be subject to capital gains tax as a limited company is a separate legal entity. The tax can be quite high. There are certain exemptions available based on case law in Ramsay vs HMRC. At a high level, you need to be working at least 20 hours a week on your property portfolio in order to qualify. This area is very complex and great care is required to avoid a challenge from HMRC.
Stamp Duty Land Tax is payable on the transfer of properties into a limited company. The rules on stamp duty are quite strict and the exemptions available need to be analysed and applied very carefully to avoid a challenge from HMRC.
When transferring properties into a limited company, you should not ignore the short and long term benefits including inheritance tax. The properties will grow in value and can have long term inheritance tax implications if no tax planning has been done in advance.
If you are considering incorporation or transferring your property portfolio and looking for sound tax advice to avoid problems from HMRC, contact us on 03300 577106 and book a consultation with a specialist tax adviser.