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I would be most grateful for some advice.
To keep things simple, please assume the following: I own 3 properties, one is my home/"PPR1", the second is a BTL in my own name, the third is a BTL in a close SPV. They are all mortgaged correctly - i.e. personal residential, personal BTL and SPV BTL.
Am I correct in thinking that if I wish to buy a 4th property as my new home/"PPR2", and with mortgage issues notwithstanding, I could sell my existing home/"PPR1" into the SPV at current market value (e.g. mean of 3 local estate agents and broadly in line with RICS valuation) with the SPV being liable only for stamp duty (including the 3% surcharge of course) on the purchase price/current market value. I am supposing there would be no CGT liability anywhere as the property is my PPR.
My second question is that on the assumption that I port the personal residential mortgage from "PPR1" to "PPR2" and take out an SPV BTL mortgage to fund 75% of the SPV's purchase of "PPR1", can the 25% balance/deposit simply be unfunded by the SPV and be left sitting on the SPV Balance Sheet as a Directors' Loan (Liability)?
Thanks in advance,
That is great question! I can;t answer the first part with any certainty but i would presume your assumption of 0% CGT is correct.
The second part I am more certain of in that again your assumption is correct, however practically speaking I don't think the SPV BTL mortgage can be described as a port in the typical sense as the resi and SPV products will be against different names/entities. Hence the deposit value will be effectively transferred from resi lender to the SPV lender via yourself and therefore treated for accounting purposes as a directors loan, Hope that helps!
Thanks Iprd2, it sounds like you are confident regarding the Directors' Loan bit which is helpful. Just for clarity, the porting of the resi mortgage would be from the personally owned PPR1 to the personally owned PPR2, the former being my current home, the latter being my new home. The SPV would at the same time take out an SPV BTL mortgage to fund 75% of the purchase of PPR1 from me in order to effectively replace the funding transferred from PPR1 to PPR2. Thanks again.
Two simple questions but loads of issues and clarifications,
on 1) PPR relief will only fully relieve the gainin full if the property in question was always throughout your ownership your PPR and there were no Lettings for example of a garage on the site (rent a room relief excepted).
Company purchase don’t pay the higher 3% SDLT but there rates are 3% higher so basically one is always caught and need to find other SDLT solutions.
Don’t forget to file your ATED return or relief claim with a few weeks of the transfer.
Your comment re market value is not right but will probably suffice. HMRC may engage the district values to value the property and challenge your valuation. The rules don’t allow for averaging estate agent values and refer more to willing third party purchaser.
on 2) no issues with what you are suggesting. If your lender permits you can port your residential mortgage to your new home. The SPV will buy the property part in cash from its lender (not ported mortgage) and from a loan which you provide. This equity will be a paper transaction and you need to ensure your broker understands how this works as there is no deposit for the purchase. You can then receive repayments of this equity loan from the company as and when it has funds.
We do this sort of thing fairly regularly and sometimes it is worth considering family issues as well and wrapping up solutions for that at the same time.
Tax advisor and mortgage broker
Thank you Stuart.
It's always been my PPR and there's been no lettings at all so I will get full relief on this one.
I am a bit confused by your comment about limited companies and the 3% SD surcharge as my SPV has always had to pay it, but maybe it's just semantics as you say it's all ultimately the same rate anyway...?
Noted re the ATED return and market value comments.
And thanks for confirming point 2.
Appreciate your response, thanks again.
No problems. Best of luck