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No. I asked three financial advisors...
And the plan goes out the window ? I've two meetings set up for next week with a l property awyer and an accountant It'll be interesting to see what they say.
I was referring to this part of your original post:- "Would I be breaking the law, commiting fraud, or any other laws if I sold a property that was say, valued at 450k to a company of which I was director for 250k?"
In this scenario, we can arrange a mortgage of £250k against a valuation of £450k. Even though it would strictly speaking be a purchase by your Ltd Co, you would not need to find the £200k balance; you as the individual would 'gift' it to your Ltd Co. This is the only way realistically, that you could easily transfer a mortgaged BTL property from your individual name to your Ltd Co.
However, if you own the property outright, then the mortgage situation is no longer valid; it is then purely a SDLT and/or CGT issue. SDLT is paid on the 'consideration' value - if you just 'give' an unencumbered property to your Ltd Co, theoretically no SDLT is due (as there was zero consideration), but I doubt HMRC would see it like that. Similarly, if the property being 'gifted' was your main residence, CGT is theoretically zero (as it's not payable on disposal of your main residence) but again, I'd get a tax advisor to confirm.
Thanks for clarifying. I see what you mean. I always understand equity-gifting to be something that was done between individuals. i didn't know you could do it with a company. I don't own the property outright although when I would in another 2 years. Thing is, I don't want to get to that. I want to be able to port the rate 0.8% above Bank of England base rate to another residential property which I will buy as an inidvidual after I've sold the current property to the company or to anyone who makes a good offer for it. I can only port that rate if I sell the current property. Just seems like a good way to increase the portfolio through a company especially with property prices going down and take advantage of the fantastic rate by porting it to a new property.
Ok, I see now what you are trying to do. I understand why you want to port such a low rate across to your new residence - that's a very good rate! Bear in mind that you will only be able to port across the current outstanding balance of your mortgage.
In terms of your Ltd Co buying your current property, you could raise a BTL mortgage equivalent to the current outstanding balance and 'gift' the rest to your Ltd Co. However, having read again through your original post, two more issues arise that may make it a little tricky. Firstly it's your former main residence, so it falls into a different regulatory category (Consumer BTL). This cuts out some lenders, although we could still do it. The second issue would be more problematic: you wish to convert to a holiday let. This is no longer a 'buy-to-let' but essentially a commercial mortgage and many of the main BTL lenders cannot accommodate it.
However, with the caveat about the previously mentioned tax position, you can, in-principle, transfer ownership to your Ltd Co.
This is most interesting. There's a lot to explore here. Thank you for the great advice. I have some meetings lined up so I'll put forward the points you raised. Much appreciated.
My mortgage lender got back to me on Friday with answers to the questions I put forward to them. The good news is they are fine with the arrangement, ie. sell the residential prop to my company so I can port the rate to another residential property I buy as a private individual. Fortunately, we are not restricted to just the outstanding balance of our mortgage. They'll look at our current situation and whatever they're willing to lend will be based on affordability.
It was after reading your comment that I realised I had forgotten to ask if there was a restriction to how much we could borrow for the new property. Thanks.
I totally understand what you are trying to do and it makes sense to me – but you are right to question the ‘legality’ of the transaction.
You are at liberty to sell anything you own to someone for whatever you want to sell it but with property there is stamp duty taxation.
All the evidence I have read so far indicates that you are effectively ‘gifting’ the difference between the real value and the selling price to the purchaser. Stamp Duty is payable on the actual purchase price – unless HMRC decide that you are simply evading it rather than avoiding it.
When doing this for immediate family members it is usually understood but although you are technically selling it to yourself through a limited company that is a separate legal entity. So you should talk to a solicitor sooner rather than later.
From a lender’s perspective, they are usually OK with it so long as the solicitor is OK and they are not responsible for any taxation implications. Effectively they require is that the transaction is clear and transparent, which a good solicitor would ensure.
I hope that helps,
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Thank you, Cat. I have a meeting with a lawyer lined up. Don't want to mess about with the law. Makes a lot of sense. My mortgage provider has already told me they don't care who I sell the property to or for however much. They are there to supply the money. They told me to make sure I talk to a lawyer.