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  • Tax

    Incorporation Relief

    Say I’ve got 50 houses. Can I keep 20 in my personal name and put 30 into a limited company and claim incorporation relief? Or can I only claim incorporation relief if I put the 50 into the company?

    Also does the portfolio have to be transferred on the same day or can I transfer the houses on different days as long as it’s during the same tax year?
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    If the properties are in your sole name then incorporation relief is a no no

    If you are a partnership then all the properties owned by the parnership must be transferred and at the same time

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    What if my portfolio is jointly owned 50/50 with my wife (but not in a partnership)?
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    If you own property jointly with your wife then that is in fact a partnership

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    Not as I understand it. For example we don’t do a partnership tax return. She has no involvement in the business and is there just to make the portfolio as tax efficient as possible.
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    In that case unless your question is purely hypothetical then its time to consult accountants experienced in incorporation relief S162..

    Best to avoid snake oil salesmen flogging altrnative schemes

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    Sorry don frump is not completely right here.

    Incorporation relief is based on you having a business and transferring all assets of that business (other than cash) to the new company.

    The reason that don has said incorporation relief is a no no for you as an individual is due to stamp duty land tax I suspect. That's a different question and of course may not apply depending on property values (although I suspect with so many properties it will apply). Don is implying using a partnership to obtain relief from SDLT. If you are a partnership then fine but a husband and wife combination as you describe it is not automatically a partnership - or at least is open to challenge (after the event). HMRC tend to not view H+W property ownership as a partnership and whilst we could debate this all day the courts have generally looked at the amount of work done by the partners. I don't necessarily agree with all the detail of the court cases but the point remains that if you are a silent partner then it is far harder to demonstrate that you are in business as a partner. The Ramsay case is often cited on the various requirements meet partnership requirements.

    HMRC are now wanting to see partnership tax returns produced and whilst as a matter of fact this is not relevant as to whether this is a partnership it certainly helps. I prefer to avoid having an argument with HMRC if it can be avoided.

    You will also hear about a three year rule which is about extracting whether you can extract the implicit gain tax free.

    Don is however right that you should take advice. This is a complex tax matter and as it deal with capital values the cost of getting it wrong is usually very high.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    hi stuart

    many thanks for all your great advice.

    re 'Incorporation relief is based on you having a business and transferring all assets of that business (other than cash) to the new company.'

    If this is done from personal ownership via a partnership as the initial step, presumably the rentals need to be transferred into the partnership, thus incurring SDLT etc?

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    Not necessarily. It depends on the type of partnership. This is an example of why you should take advice.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022

    thanks.  normal husband and wife partnership where both heavily involved.

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