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I was wondering if it is feasible for me to lease my BTL properties in my personal name to my SPV. I am the sole director of my SPV. (It works out more tax efficient for myself).
If i was to lease the properties to my company at what rate would be acceptable? Could i technically lease them for free? Therefore all my tax will go through the company rather than my self assessment?
I've done this for years and if it is a HMO is a great way to save tax, as you can lease it to your company at the single let rate then the Ltd company collects rent at the HMO rate. A rent to rent to your Ltd company!
Thank you mike!
Would it be seen as "tax evasion" by the HMRC?
As the sole purpose of running the rent through the company with minimal lease fees would be to reduce the tax burden? Could i technically lease them to my company for £0/year?
This could be challenged by HMRC as a series of steps designed to reduce/avoid tax. There are few famous tax cases on this sort of stuff - and it is in HMRC's favour!
For this to work you cannot argue that the HMO leases in the SPV are valid but that the whole arrangement is not a sham. Was it designed for tax purposes? If so forget it. You need a business reason for doing this. Is the already HMO licenses? Do you as an owner have a history which will mean you will not get an HMO license. Does your SPV have other partners that make this work commercially? Without these sort of things I don't think it work. You need to show a commercial rationale which is not a tax saving idea.
Of course pub chat will tell you that it's fine and like every legal issue in the UK its fine until you are caught.
The loss of rent without CGT may trigger an HMRC inquiry. And a lease for £nil would legally be ok I think but for tax would be ignored as it is connected parties and substituted with market value.
Part of the consideration of course is that a standard AST will prohibit HMO usage. Therefore if the SPV is permitted to do this then the value of the AST is higher. And when you get to the end of this trail you realise that the SPV is adding nothing to the equation and so there is no profit to shield in the SPV.
And of course now you need to consider that if you have a mortgage you will have s24 issues personally and not in the company.
Beware of pubs saving you tax! Duty of beer should be enough to realise this does not work! if you want to save tax, go to the casino!
Any further tax (or mortgage) questions please contact me on email@example.com or 02039077022
Tax advisor and mortgage broker
Thank you Stuart,
I want to keep things completely above board and legal without HMRC enquiries!
My SPV has 2 employees which have skill sets to manage the properties. Mother as a secretary and father as a maintenance man. So from a legal point of view managing the properties through my SPV does have a valid business reason. My SPV can also rent guarantee due to an insurance policy i have for multiple properties.
Would this be seen as enough of a reason to move things across?
I have no mortgages on these personal properties and own them outright so that shouldnt be an issue.
My main concern is that I am the sole director of the SPV and also the owner of these personal properties.
If your doing this to avoid s24 it won’t work
or is there something I have missed here
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
I have no mortgage, its not for this purpose at all.
I am a 50% tax payer. This is to make things more tax efficient through my company structure.
A 50% income tax rate
really that’s interesting to know
why is it interesting?
If your paying 50% income tax I would seek the advice of a accountant
I have had conflicting information from 2 accountants on the possibilities hence I wanted to see what others were doing.
My income tax is not 50% alone just from properties, but from my full time job.