A client and her sister are being gifted some residential rental properties by a parent. Our client already has a property rental limited company, but the sister doesn't have one and doesn't really need one.
Presumably it's alright to have joint ownership between a limited company and an individual?
It isn't practical to have one person owning two properties outright and the other three owned outright by the other person.
Will a bank set up a joint bank account in this situation?
What about leases - presumably these can be written with the landlord being jointly limited and individual?
Any other practicalities to consider in this case?
Thanks
Replies (4)
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Joint ownership is not necessarily a partnership.
Is the proposed gift to your client, or to his company?
Technically there is no problem in properties being owned by two persons, one individual and one company. Is the joint ownership intended to be a tenancy in common-it will be by default [subject to legal advice to the contrary] where the joint owner is a body corporate ?
Property partnerships are not that common. and have some unexpected tax consequences as profits and losses are ring fenced [See ITTOIA s859(2)].
There is also a minor anomaly for IHT where the instalment option is applied. A property owning partnership [not an LLP] as opposed to joint ownership qualifies for IHT as a 'business' under s234(1)(a) ,so that neither s233 nor s.234(2) applies. In simple English, that means that interest on instalments runs only from the due date of each instalment, not from the original due date following the death. That could encourage your client to hold his share of the gifted properties personally and for a formal partnership rather than mere joint ownership to be established.
A gift to a limited company where the donor is connected to the company is not exempt from SDLT [FA 2000s119]. 'Connected' is as defined in CTA 2010 s1122.
No doubt you have considered the CGT and IHT aspects of the proposed gift by the parents, as you have not mentioned these as giving you any concern. You make no mention of any mortgage being in place-that could complicate matters further.
Your client's existing company could administer the partnership[ or jointly owned property] if brother and sister are comfortable with that.
You needed to know who actually currently owns the property, and on what basis before offering any advice on this.
A gift to a company from an individual who has no interest in the company is a CLT for IHT purposes, as well as being a deemed market value transfer for SDLT purposes.
If the gift goes to the individuals, then the individuals can immediately sell the property to the company for market value, without increasing the amount of SDLT due, and have a loan balance from which they can subsequently draw, rather than having to take dividends.