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So another Limited Company question, hope members don't mind but thought it easiest if I just state my situation.
Well the situation is that I own a piece of land with full planning permission. In the near future I intend to build a house on this building plot. Question is am I best of moving this building plot into a Limited Company first then building the house or am I better of moving it into a Limited Company after it is built? Or does it not matter either way? I have not yet set up a Limited Company but I intend to. The reason being is that I already own a small terrace that I wish to rent a couple of rooms out to Lodgers. So if I own another house then that may get classed as my main home leaving me in danger of losing Lodging status on the terrace house. I certainly don't want to go the route of Assured Tenancy as it's too much of a PIA getting involved in that one.
I ask does it matter either way as can I get charge my Limited Company a nominal value of £1 say to sell it (Land or built House) into my Company - hence avoiding Stamp Duty, CGT, etc, or would I have to get it valued at a market rate?
I intend to hire an Accountant to sort all of this for me at the given time but I was kind of wondering in advance what the outlook may be just to get an idea. I hear it tends to be a case of selling the property into the company which tends to attract stamp duty and conveyancing fees at the very least. Is there any other way to get property into a Limited Company other than selling it to it?
I can definitely relate to your question. I'm not qualified in any way to give advice but am looking at a similar scenario.
If you sell or gift your land to your company, stamp duty will be charged at its current value at the commercial rate. If you sell or gift the finished house to the company stamp duty will be charged at its completed value at the residential rate, i.e. plus 3%. Expenses and allowances will be different if you build it in your own name than if you build in the company name. If you plan to live in the completed property you may be subject to Benefit In Kind taxes. This is where a good property tax advisor is needed.
I will soon have 2 homes with lodgers. One will be my PPR (Principal Private Residence) which will effect CGT (Capital Gains Tax). The other will be my main home where I can use the RARA (Rent a Room Allowance). You can only have 1 PPR, which you can nominate. There is no definitive test for a main home but it helps if that is where you are registered to vote, GP, banking address, etc. If your second home is also let as a holiday home there are other tax considerations.
Taking your lodgers to the limit, if you don't share with them all the time, they will remain lodgers as long as you share when they move in, you share at least once a year and you can show the intention to return and share in the future. This is likely to change next year with the introduction of the shared occupancy test which has not yet been defined. Your mortgage (if you have one) and insurance criteria are likely to be more stringent.
Thanks Gary, you certainly know more than me, it's great to have your input I just knew that the Lodgings house was classed as 'your main or only residence' so thought maybe if you rented elsewhere, owned a place abroad you might just swing it. So it's good to hear it's feasible to own another house under the principal property, of this I knew nothing. I think given that it would be best to build the house and have that as my 'principle property' and the Lodging terrace house as my 'Main Home'.
To be honest the terrace Lodging House is not that suitable as a main home in terms of Living there week in week out particularly if there are Lodgers. It's could be done but it's more suitable for stay overs. I personally prefer a detached house with a bit of room around it which the built house 'principle home' will be. That and I like to move around a bit. Being stuck in any one location too long can feel clostraphobic to me.
The terrace house I'm not actually yet renting out to Lodgers but will be. I'm presently converting it from a one bedroom to a three bedroom with a small extention. I always planned on keeping the smallest room as my stay over room. So should be fine for the change next year I'm guessing. The detached house when built I just plan to live in more often and not to rent out at all since I will have more of my stuff there and it's less suitable for Renting/Lodgings. So I'm guessung woukd avoid CGT that way, not that I would be planning to sell it anyway. I've heard about 'benefit in kind' as used to do basic Accounts work so wondered if this might arise if I put it in a limited company. This along with other factors suggest to me I would be far better of and have an easier time of it keeping the land development as a private individual ownership as it currently is and just put it down as a 'principal residence' when built.
My guess is that HMRC might state that you need to show you have a spare room i.e not rented out to Lodgers for yourself or have proof of being at main residence with times and dates if not for their 'test' when/if it comes in next year. I guess we won't have long to wait for that if they stick to the April time line. Anyway, thank you once again Gary for your help, you've made the situation a whole lot more clearer and straight forward me
A word of warning around PPR (Principal Prime Residence).
Once you acquire a second property - you have a max 2 yrs to write to HMRC making an election as to which property is to be the PPR - failing which the first property will remain the PPR.
Once you do make the second or subsequent property the PPR - you can then shortly after revert the PPR to whichever property best suits immediate plans.
Normally you would want the more expensive property to be free of CGT.
If your not borrowing money keep your investment in your own name
to move personal property into a company just puts you in a straight jacket
why not leave the land in your name and lease it to a company if you need to borrow to build
a company is not always the best choice
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 agree that a company is not always the best choice but there are advantages other than income tax avoidance.
Personally, I'm convinced that owning in my own name will put me in a straight jacket as I age. I don't want the legal ownership, only the beneficial ownership, and the care fees and IHT implications of doing this in my own name are quite severe.