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Thank you for your reply.
The purpose behind the sale is to crystalise an existing gain against say this years allowance so that this years allowance is used up rather than wasted. The objective being that when sold, say in 3 tears time, only the gain within the period owned by the company falls into tax, assuming that the gain at the moment is fully covered by this years allowance.
I am puzzled by the point that buy to lets are not allowed for ltd companies as many accountants are suggesting moving buy to lets over to limited companies in the light of the tax changes in George.
Osbourne's recent budget.
Are the accountants or myself missing something ?
Their are many thousands of limited companies in the UK which do this and about 100 mortgage providers who provide funds for this purpose.
Perhaps I am using the wrong terminology within this question.
Please see the following extract re classifications.
Companies that trade only in rental property are known as Special Purpose Vehicle (SPV) limited companies and they can be classified in different ways by lenders, according to the Standard Industry Classification (SIC) code that the company is registered under at companies house.
Typically these include:7012 – Buying & sell own real estate,7020 – Letting of own property, or7032 – Manage real estate
If your view remains at odds with the practise within the uk please advise on how I can transfer my question to someone who is closer to this area.
Thank you for your view.
I have done further research and confirmed the industry practise of using special purpose vehicles for this purpose.
I would like to accept your offer of you opting out so as to open up the question to someone who has experience of SPVs and capital gains.
Is there an action that I need to take to open this question to others or is it an action by yourself ?
Please could explain why for a considerable time (years) the industry has used SPV's for ltd company buy to lets yet the view is expressed that this would not work ?
I do not wish to be impolite but the issue is your colleague no dougt has great experience but it appears not in this area, so I was hoping to find someone who has.
Thanks for the reply
May I expand on the banking of capital allowances point in the original question.
Assume I have 5 properties in joint names.
Each cost 80k and are now worth 100k and we joint have 20k annual capital gains tax allowance.
In year 1 we sell the first property to the ltd company for 100k and use up that years allowance with no tax to pay.
We repeat this each year until all 5 are owned by the ltd company and are on the books for 100k each.
At the end of 5 years we wish to sell all 5 each of which are now worth 105k.
Total capital gain which falls into tax (corporation) is 5x5= 25k
Whereas if we had not sold to the ltd company the gain subject to income tax would be 5x25 =125 -20(being one years capital gain allowance) = 105k
Assuming this works then my libility is much reduced because I have in effect "banked" 5 years of capital allowances.
My question is therefore would this work ?
Thank you for the reply, the rates are an interesting point, perhaps I could however illustrate a little more clearly the central part of my question.
The 125k gain would only exist if the properties were not sold to the company. In which case the gain would be a personal gain.
By selling to the company over the 5 years each property is in the company's books at 100k so when sold there would be a 5k gain per property ie 25k overall.
In this example the objective is to switch a 125k personal gain for a 25k corporate (both figures beings for all the 5 properties).
Is there anything I have not thought that would get in the way of this tax saving ?