How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4953
Type Your Tax Question Here...
bigduckontax is online now

Transferring mortgaged buy-to-let to a limited company

This answer was rated:

Transferring mortgaged second buy-to-let home to a "limited company" to save tax. Person owns a second property, buy-to-let mortgaged. The property will be let out on assured short hold tenancies. The owner is a higher rate tax payer and would like to reduce tax payable on rental income. Is there a benefit in transferring the ownership of the property to a limited company where the owner is the director? Will the lender allow that? What is the process of doing that?

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. This is a perfectly feasible method of tax avoidance transferring the liability to a limited company with Corporation Tax (CT) at 20%. However, when the company distributes the income then that distribution is, in itself, liable to to personal taxation at the recipient's marginal rate. Furthermore, if this is achieved by means of dividends, this is not allowable against the company's profits for CT purposes thus effectively getting the income taxed twice. Furthermore, any distribution to a director, other than by dividends, must be made under PAYE arrangements as a director is deemed to be an employee. The transfer of a second home counts as a disposal thus exposing the transferor to Capital Gains Tax (CGT) on any gain made on transfer. The transfer price for CGT will be the current market value. Finally, there is the lender's position to be considered Lenders tend to be a tad hide bound and may not be prepared to assist in such a transaction which would require a new lender to be found. Arranging another mortgage, and indeed changing the current one, would be an additional cost to you.Transfer of the property itself could be achieved relatively simply using a Land Registry Transfer form, but with the complexity of a mortgage you will almost certainly need a solicitor to arrange a conveyance; more expense. I do hope that I have shed some light on your proposal.
bigduckontax and other Tax Specialists are ready to help you
Thank you for your support.