Updating post from Reddit.
I already have a similar post going with some very helpful responses but I’m still finding some contradicting information on various tax sites.
Background:
I own a BTL that I have already paid higher stamp duty on and we also have a residential we currently reside in.
I want to buy a new residential and transfer my current residential to a BTL/LTD.
If I transfer the current resi to a BTL/LTD before I purchase the new resi, will I pay standard or higher rate of land tax? Or will I pay no land tax because I’m transferring my only residential property to my company that has no other properties?
If a transfer and then buy a new residential will I then pay the the higher rate on the new resi or just the standard rate?
Soooo confused what order to do what!! Spoke with a couple of accountants and even they give me different answers!! I have no idea what to do!
Many thanks
You’re not transferring, you’re selling the property to the Ltd Co so higher rate stamp duty is payable (again, this time by the Ltd Co) plus CGT on any personal gain. Company also pays higher rate duty on the second purchase. At least that’s as I understand it.
Exactly this but I think the higher rate stamp duty is for every property a limited company buys so the first one will have a big bill. If op has a mortgage they would effectively need to seed the company a directors loan to the company as a deposit then buy at fair market value with a specialist mortgage for commercial buying residential can't just sell it to the company for £1 or keep the current mortgage. Selling it would also trigger early repayment fees with the mortgage mine for example wants all interest for remaining amount of the term. If op has student loan this could also trigger payments for that.
No CGT when selling resi
The capital gains tax relief is just for a property you live in or have lived in (assuming you haven't rented them out in the meantime), not for investment properties even if they're residential.
Unless I misunderstood, when the OP writes "residential" they mean their home / primary residence). So surely PRR applies when selling this to the ltd company.
Yeah, sorry I've written a longer response on the feed.
Yes, but he also wants to transfer (ie sell) his current BTL to the Ltd.
LLP: You can transfer in.
LTD: You can't.
Exactly this. We have a family partnership. Also good for IHT planning
From an established tax site.
“Since you have lived in it as your main residence for all the eighteen years that you have owned it, you will incur no CGT on the sale to your company.”
That’s correct. But are you maybe confusing CGT and Stamp?
Limited companies always pay higher rate of stamp duty when buying properties. You'll be buying it at a fair market value
You won't pay personal CGT if it has been your main residence
This is my understanding and will always pay the higher rate for any property purchases under a LTD. Would the onward purchase for a new resi in my name be at the standard or higher rate? What are anyone thoughts on this step? Thanks guys
You'll pay standard stamp duty as long as you don't own any other homes in your name (Ltd company homes aren't in your name so don't count)
Thank you.
If you sell the resi to a Ltd the Ltd will pay higher SDLT but you won’t pay higher for your new resi as you’ve sold your old resi.
I was in a similar position last yr. Got as far as creating the Ltd company and paying initial fees for solicitors but the numbers just weren’t adding up if we want to sell in 10/20yrs So kept it and have 2yrs left if we want to sell to claim back the extra SDLT we had to pay on our resi. Perfect solution would be the current tenants buying it but that’s a pipe dream 😆
So, the way I see this is, simply stated, the ltd company that you are a director of is going to raise a commercial mortgage and buy your current personal primary residence. In this scenario for accounting purposes the property is purchased at full market value, and the higher rate of stamp duty for LTD companies is paid, it's up to you and your lender how much mortgage you can raise against the property, but the difference between the mortgage and the market value is shown as a directors loan. There'll be no capital gains tax to pay as you've essentially just sold your primary residence. When you buy your new property you'll just pay standard rate stamp duty, because it's your primary residence.
Where and what are you finding that appears contradictory?
It's not clear. But I think it's the order in which things happen. something i don't think anyone has said, that if the OP did buy a new house before selling their current one to the limited company, they would pay increased stamp duty, but could claim it back once the property was sold, assuming they didn't rent it out in the meantime.
I'm not sure about the last bit of what you say. I was always under the impression you could rent it out during that 3 year period between it stopping being your home and you selling it. And I've never found anything in their guidance/manual that contradicts that but I'd be interested to see it.
You pay capital gains for the period of time it was rented out, but get relief for the time it was a primary residence plus a grace period of nine months. I think it's worked out a linear value divided by time type of idea.
Agree re CGT. But I thought we were talking about higher-rate SDLT refunds here. That's the one I can't find a source for.
because you pay a higher rate of stamp duty if it falls within the criteria of a second home.
Yes.
You have a home you live in and a BTL both in your personal name?
If you sell the BTL to a LTD company you will pay the additional rate as the LTD company.
If you sell your current home and buy a new home you then move into, you will not pay the higher rate no matter what you do with the BTL. (not what you have said you want to do)
Just as a note, you can’t “transfer” a house. You can sell a house, but you absolutely can’t just move the house into a company.
I highly advise selling your residential as it’s unlikely to be a good rental, buying your new home and then down the line buying a fresh BTL in a LTD. It’s not worth keeping the current home IMO (as someone that kept it - sentimental not financial).
Thank you. In all honesty it is partly the sentimental factor, but it also will return 1500 pcm and is currently only valued at 215k. It would be a property I would want to purchase again in the future, seems better to just try and keep it now as stamp duty will be the same.
The current BTL will stay in my personal name.
Thanks
Much better yield than I would imagine for a house bought to be a home, so yeah, I agree with you!
I’ve done this. I sold my primary residential to my ltd company - ltd paid higher stamp. I paid standard stamp on my onward primary purchase.
Stamp duty is lower than cgt so was worth selling the primary at full price to my ltd.
Used equity in the primary residential as deposit. Think it was called a let to buy mortgage or something like that.
When transferring the current residential property to the limited company, you will qualify for Private Residence Relief (PPR), so no Capital Gains Tax (CGT) will be payable personally. However, the company will be liable to pay the higher rate of Stamp Duty Land Tax (SDLT) on the purchase. For the new residential property, SDLT will be payable at the standard rate. Try to make sure that the sale of your existing residential property to the limited company is completed before purchasing the new property. If not, you may initially have to pay the higher rate of SDLT on the new purchase and then reclaim the surcharge once the existing property has been sold to the company.