X

Sign Up

or

By signing up I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Sign Up

Sign Up With Facebook, Twitter, or Google

or


By signing up, I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Log In

or


Don't have an account? Sign Up

Forgot Password

To reset your password just enter the email address you registered with and we'll send you a link to access a new password.


Already a PT member? Log In

Don't have an account? Sign Up

  • Tax

    Stamp duty on first buy to let through LTD

    Hi all,

    I'm new to this so bear with me. I have set up a LTD company to purchase BTL. My question is it is the first property the LTD company is buying sondo I need to pay stamp duty on this property at the 3%? It's a bit of a grey area in my eyes as it could be classed as a second home owned by me.

    Hopefully someone one can clear this up.

    Thanks Mike

    0
    0

    The company pays SDLT at the company rate

    It doesn't qualify for a reduced rate on its first purchase in the same way that an individual does

    Bang the numbers through the calculator.  Note question 4 "Status of Purchaser"

    https://www.tax.service.gov.uk/calculate...ax/#/intro

    0
    0

    The bigger question is why are you using a limited company in the first place?

    Buying or transferring a property portfolio into a limited company simply to offset the S24 reduction in mortgage interest relief rules has many disadvantages which can be summarised thus: -

     

    ·        Liability to capital gains tax and stamp duty if you can’t prove your entitlement to S162 incorporation relief (you must be working 19-hours a week or more in the business or pull the wool over HMRC’s eyes via a temporary LLP).

    ·        Upfront remortgage costs such as early redemption charges, brokers fees, lenders fees, and legal fees.

    ·        Most lenders won’t lend to limited companies, and none are keen on so called ‘beneficial interest company trusts’ as they fundamentally weaken their ability to pursue the debt.

    ·        Significantly reduced choice of lenders and higher interest rates.

    ·        Lenders will mostly require a personal guarantee (if the company goes bust you remain responsible for the debt).

    ·        Lenders will take a debenture (legal charge) over the company’s balance sheet, which restricts your ability to make best use of your director’s loan account if at all.

    ·        You’re tied in to the first lender and their appetite for further lending if any, meaning that each new acquisition or remortgage may need a new lender and a new company.

    ·        A limited company is fully visible to HMRC and subject to corporation tax, dividend tax, income tax, and national insurance.

    ·        It’s almost impossible to mitigate inheritance tax (40%) without expensive (at every stage) and ultimately uncertain ‘opinion-based’ trusts, meaning that your heirs may have to break up your hard work just to pay the tax bill.

    0
    0

    Hi Tony

    Can I just query your last bullet point please?

    "It’s almost impossible to mitigate inheritance tax (40%) without expensive (at every stage) and ultimately uncertain ‘opinion-based’ trusts, meaning that your heirs may have to break up your hard work just to pay the tax bill."

    What about Business Relief? It seems like a relatively simple process and one that seems far more user friendly than dying and leaving loads of property not within a vehicle.

    0
    0

    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk


    In simple terms, investment companies i.e. those that hold property for the purpose of collecting rent do not qualify for business relief.  Only trading businesses do.

    0
    0

    Tony

    If as you say the limited company route isn't the way to go, which route would you recommend

    0
    0

    Hi George,

    Probably best to talk, and can you please email me your contact details (tony.gimple@lesstaxforlandlords.co.uk) and I'll give you call early next week.  Sorry that I can't do it before, but am back to back with client meetings until Monday.

    0
    0

    Yes good point I didn't think of it that way, because my property company is a trading business and not solely an investment company.

    0
    0

    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk


    By your definition or by HMRC's?

    0
    0

    I always tend to use HMRCs definition for calculating tax because they are by far the easiest to defend in court if need be.

    0
    0

    Landlord with 25 years’ experience in the property market and a specialist in tenant referencing ID and credit screening. Creator of identity, credit and anti-money laundering system ValidID.co.uk


    Which of HMRC's definitions? They use at least three depending on which part of the tax code you are looking at.

    0
    0