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Incorporating Property

I have a client who has a property rental portfolio and wishes to transfer the properties into a limited company.  His solicitor is saying stamp duty is payable on this transfer.  Is this actually the case, as this seems unfair as he has already paid stamp duty on the original purchase.

The property portfolio is mixed between domestic & business premises.

He also has a schedule D sole trader business.

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By afairpo
15th Mar 2012 12:51

SDLT: yes, it is unfair.

Yes, stamp duty land tax is paid on the transfer of the property to the company on incorporation.  Even if it passes for nil consideration, the individual and the company will be connected persons and so SDLT will be due on the market value.  There's no relief available for incorporation for SDLT purposes.

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By blok
15th Mar 2012 14:06

.

If the rule didn't exist it would be easy to transfer your house worth £1m into a personal company and sell the shares.  The purchaser would then pay 0.5% stamp duty (5,000) on the shares as opposed to 5% SDLT (50,000).  

So there is logic to it.

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By stgreg
16th Mar 2012 11:57

Why?

a client ..... wishes to transfer the properties into a limited company 

I would ask him why he wants to do this. There may be good reasons but one tends to start with the premise that you keep property out of corporate ownership to avoid a double CGT charge

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