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  • Tax

    Partnership to Ltd Co

    Hi,
    Partnership now going into Ltd Co. My accountants understanding is that possibly the fair market value may have to  reflect any borrowings when going over. Is this correct? ie;- market value today minus mortgage. 

    thanks,

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    Yes indeed! But now I'm doubting myself!!! So can you confirm for me that she has this wrong?

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    It has to be market value, loans have no bearing on the CGT held over into shares unless the base costs of your portfolio is lower than loans outstanding.
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    think you have to pay stamp duty aswell that's why haven't changed any of mine yet, sure you will need new mortgages in ltd company name aswell and personally guarantee them and rates are probably higher than you are on now


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    No stamp duty, no CGT if you meet the requirements and structure the transfer.
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    This is a complex area on which you should take specialist advice. Yes, it is POSSIBLE to incorporate a property partnership without incurring a charge to SDLT and on the basis that capital gains would be "rolled -over" but the tax legislation and HMRC policy is a minefield! I have advised on these transactions previously. Please contact me to discuss: Marc.selby@laytons.com
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    The consequences of getting this wrong I suspect are huge, so take proper advice from someone who knows this stuff. It's a fairly basic issue and although the above points are right there are also HMRC statutory concessions to consider. You need to think about how you structure the debt. If incorporation is for you then you need to see how you avoid CGT and SDLT and get some money back tax free. Usually when we do this with clients it's the last point they have not thought of and it's the biggest point of all.
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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    The bigger question is why are you even thinking of incorporating in the first place, as it'll be the most expensive mistake you'll ever make.


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    Tony Gimple

    Founding Director, for and on behalf of

    Less Tax For Landlords

    0203 735 2940

    http://www.lesstaxforlandlords.co.uk