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Sam, Accountant
Category: Tax
Satisfied Customers: 7509
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Could you tell me if its better financially to sell a property personally owned or se

Customer Question

Hi , could you tell me if its better financially to sell a property personally owned or sell it from a Ltd Company . I am a landlord with a small portfolio moving from sole trader to Ltd Company structure. My accountant has advised setting up a special purpose vehicle, whereby I lease my properties to the ltd company and make use of the lower rate of income tax and still get the mortgage relief. part of the portfolio is 4 flats with no mortgage . I will want to sell 1 flat next tax year , and was wondering if its worth transferring the flat I intend to sell into the ltd company now, or just selling as personal property.In relation to this can you confirm that any mortgage free property transferred into a ltd Company will attract no SDLT, and also that any CGT payable can be deferred until its sold at a later date.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi Mark Thanks for your question Its always better to sell if as personally owned as you then qualify for annual exemption allowanceI disagree entirely with your accountant that this is a wise move, as you will incur capital gains by transferring the properties (which cannot be deferred) AND the transfer will incur a stamp duty charge whether there is a mortgage or not as you are transferring (selling in essence) to a different legal structure.And your accountant seems to be just suggesting that you lease the properties to the limited company - but what is the limited company for - do you trade or have a business as a limited company cannot just own normal rental properties as its not trade income its rental income. Then even if this was a wise move (and a legitimate move) you would have all the additional accountancy costs (which I suspect your accountant failed to mention) as you will have a Companies House and a Corporation Tax return plus certified accounts, plus payroll to run (with expenses and benefits tax return) then the strick guidelines and timelines for these are considered dividend payments and then still a self assessment tax return ! This only serves to line the accountants pocket I am afraid, and this special vehicle, if it has any off shore implications or its an umbrella services company - then walk away - this does not sound like your best interests are being represented here based on what you advise ThanksSam