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JGM, Solicitor
Category: Law
Satisfied Customers: 9983
Experience:  30 years as a practising solicitor.
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I have four properties and I want to turn this small portfolio

Resolved Question:

I have four properties and I want to turn this small portfolio into a Limited Company. What is the best way to do this and what are the benefits or pitfalls of this venture?
Submitted: 2 years ago.
Category: Law
Expert:  JGM replied 2 years ago.
Thank you for your question.

How long have you owned each property?

Has there been any material increase in value of each since you bought them?

Are any of the properties mortgaged?

Are they tenanted?

Do you live in any one of them?
Customer: replied 2 years ago.

1. a)25 years,

b)6 years for two

c) 1 year


2. a) increase by £267,000

b) increase by approx. £ 200,000 each

C) increase approx. £300,000


3. a) mortgaged till July 2014

b) No mortgage on each

c) No mortgage (New build)


4. a) Tenant to start March 2014

b) Both have tenants

c) No tenants


5. a) No

b) No

c) No

Expert:  JGM replied 2 years ago.
Thank you for your reply.

As far as a limited company is concerned, this is easy to incorporate and set up. Your lawyer or accountant can do this for you immediately and appoint you as director.

The next stage is to convey the properties to the company. The property that has a mortgage is problematic in that you will require to to repay the mortgage before transfer so the company may require to apply for a new mortgage for this purpose.

Assuming that can be done then your solicitor will deal with the conveyance of the properties from your name to that of the limited company and the registration of title at the Land Registry.

Tax issues:

Normally the disposal of a property which is not your main residence would attract capital gains tax. However you would qualify for incorporation relief given that you as a sole trader are putting the properties into the name of a company owned by you. Make sure that the shares issued to you are of equal value of the properties being transferred.

You can read the following in connection with incorporation relief:

There is of course the issue of stamp duty on the transfer of properties to the limited company and you would have to discuss with your solicitor what the stamp duty land tax would be for the four properties having regard to their current value.

I wonder if there is any particular reason you want the properties transferred to a company? Certainly for IHT purposes it is good planning and there are other tax advantages in relation to rental income. A limits company has the benefit of limited liability although that is perhaps less relevant for a property owning company than for some types of business.

Happy to discuss further.
Customer: replied 2 years ago.

What would be the recommended type of business to start, I want to have my investment stable to pass down to my children. I am retired and want to avoid inheritance tax and want a solution that is cost effective and easy to manage by my children.

Expert:  JGM replied 2 years ago.
Whatever way you choose you will still have initial legal fees and outlays in effecting the transfers. A limits company is a good way to go as only the shares have to be transferred as opposed to the properties, once the properties are in the companies. You could also consider setting up a family trust and convey the properties into the trust. I prefer the limits company route as a company is usually a more flexible vehicle than as trust.

Remember that to completely avoid inheritance tax on your estate the transfers have to be made at least seven years before your death.
Customer: replied 2 years ago.

If I go the limits company route, what are the initial legal list and approximate cost I need to be aware of ie why stamp duty if nothing is being sold?

Expert:  JGM replied 2 years ago.
Set up of company allow £400 plus VAT.

Transfer of properties will depend on a number of factors but allow an hourly charge of £200 plus VAT plus outlays, possibly £3/4000 in fees.

Stamp duty is charged on value and consideration, not just money. See the following extract from HMRC:

"Transferring land or property to or from a company

In certain circumstances SDLT is payable on not less than the market value of a property - not the consideration given - when it's transferred to a company, for example, a property has a market value of £200,000 but the company only pay a consideration of £100,000, SDLT will be payable on £200,000.

This applies in either of the following situations:

The person who transfers the property is 'connected' with the company. The definition of a connected person is quite broad and covers relatives and people who have some involvement with the company

The company pays for the property, partly or wholly, by issuing or transferring - to the person making the transfer - shares in a company with which that person is connected (not necessarily the acquiring company)."

Customer: replied 2 years ago.

Until I go down the limits route, would it be advisable to put the properties under the name of my son now and if so could I still maintain control until the company is established or till I see fit ?

Expert:  JGM replied 2 years ago.
No, that would cause capital gains tax issues.
Customer: replied 2 years ago.

What would be the best steps to take to move to a limited company but securing the estate from inheritance tax in the meantime in case of death prior to the company being formed

Expert:  JGM replied 2 years ago.
You have to put it straight to a company otherwise you'll not get incorporation relief. There is no easy half way house on the way over to incorporation I'm afraid.
Customer: replied 2 years ago.

I have a property abroad and would like to develop it into a holiday let of some kind. I know that it does not qualify for stamp duty etc but I would like to use some equity to develop it for luxury let. When would i be able to apply for the equity or is this not an advised move.

Expert:  JGM replied 2 years ago.
You can apply for equity in a property at any time but there may be advantages to doing so whilst you own a property in your individual name and then lending it to the new company. You can then take income from the company as repayment of directors loan (tax free) as opposed to taxed dividends or directors emoluments.

This would have to be considered with your accountant in more detail.

Happy to discuss further but please leave positive feedback so that I am credited for my time. The question will not close and you can follow up any issues arising
JGM, Solicitor
Category: Law
Satisfied Customers: 9983
Experience: 30 years as a practising solicitor.
JGM and other Law Specialists are ready to help you
Expert:  JGM replied 2 years ago.
Please let me know if I can help you further with this. Otherwise, if you haven't already done so, please leave positive feedback so that I am credited for my time.

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