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Incorporating a residential letting business S162

Has anyone had any opposition from HMRC?

Didn't find your answer?

My client has approximately 20 residential he lets and is looking to incorporate. 

Having not walked a client through the process before I was wondering if anybody has already been through the situation and whether they advised HMRC before or during the incorporation. I was also wondering what the pitfalls may be, if any. My client is an active landlord and has advised that he spends between 25 to 30 hours per week managing the portfolio so from what I have read, there appears to be no issue with it being a "business".

PM's would be welcomed as I may employ assistance.

 

Thanks in advance.

 

 

Replies (18)

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By The Innkeeper
11th Aug 2017 09:23

see my pm please

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By andy.partridge
11th Aug 2017 10:02

Will watch this with interest!

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By Justin Bryant
11th Aug 2017 10:43

The rather predictable answer on whether you should write to HMRC for non-statutory clearance is "it depends". (The short answer is that you should not seek clearance in the 1st place unless you are very confident of getting it.)

In all cases where I have sought clearance it has been obtained.

You can contact me at the link below if you need help (the SDLT issues are probably more relevant in your client's case than the CGT issues and any loans obviously need to be dealt with with some care - search this forum for discussion re all that).

www.ated.co.uk

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Replying to Justin Bryant:
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By Portia Nina Levin
11th Aug 2017 11:02

Justin Bryant wrote:

The short answer is that you should not seek clearance in the 1st place unless you are very confident of getting it.

Which then makes it an utterly pointless exercise.

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Replying to Portia Nina Levin:
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By Justin Bryant
11th Aug 2017 11:04

Well, if that's your view you clearly do not know what you are talking about (as usual).

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Replying to Justin Bryant:
By Duggimon
11th Aug 2017 11:34

Why seek clearance if it's not required and you already know what you're doing is allowable? What benefit do you get?

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Replying to Duggimon:
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By Portia Nina Levin
11th Aug 2017 11:38

You clearly don't know what you're talking about either!

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Replying to Portia Nina Levin:
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By Justin Bryant
11th Aug 2017 12:01

Yes, PNL is obviously right there (for a change).

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Replying to Duggimon:
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By Justin Bryant
11th Aug 2017 17:54

Indeed. See: https://www.accountingweb.co.uk/tax/hmrc-policy/hmrc-karate-partnership-...

Needless to say, a formal GP agreement etc. or LLP would be a good idea.

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By Akrigg
11th Aug 2017 11:56

It looks like a fairly straightforward case for s162. But certainly worth going for clearance (the HMRC clearance letter may help in his re-mortgaging discussions).

As others have said - there'll also be SDLT issues, but there may be something you can do with a partnership and you can apply for a separate SDLT clearance.

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Replying to Akrigg:
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By Portia Nina Levin
11th Aug 2017 12:24

Ooh. Tell me more about this SDLT clearance?

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Replying to Portia Nina Levin:
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By Akrigg
11th Aug 2017 14:19

OK - hope I'm not going to get shot down in flames.

If you can get the HMRC s162 clearance for incorporating as a partnership (partnership possibly initiated by transferring a small percentage of your property ownerships to a spouse so no/minimal SDLT triggered at that point). Send copies of the correspondence to the SDLT clearance guys and ask them to confirm that this incorporation of the partnership won't give rise to an SDLT charge.

Its always worked for me.

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Replying to Akrigg:
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By Justin Bryant
11th Aug 2017 14:28

Yes; that's right, but you need to watch s75A FA 2003.

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By Portia Nina Levin
11th Aug 2017 14:39

Wait. What?

So we're going to ask HMRC for clearance that they consider what we have is a business (clearly indicating that we're after incorporation relief), wack the whole thing into a (possibly fictional) partnership, ask for clearance to transfer our partnership business into a company without any SDLT (which there wouldn't be anyway, unless s 75A operates), and then wack it into a company, send the client a bill, and run like Forest Gump at 16x?

Really?

And what are we doing about the finance? Are we raising new finance in the company that the company's going to give the partnership, so that the artnership can repay it's borrowing?

Are we?

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Replying to Portia Nina Levin:
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By Akrigg
11th Aug 2017 14:47

Nothing necessarily fictional about the partnership - SA400/401s all done.

It is certainly a lot cleaner if you have current joint ownership of property that you change into a partnership. The s162 is requested for the partnership.

And not running away from the client - doing all of this with a past, current and future client and talking through the process/refinancing with the current/alternative lender.

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Replying to Akrigg:
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By Portia Nina Levin
11th Aug 2017 14:58

Sounds so simple when you explain it to me.

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Replying to Akrigg:
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By Duncan Cameron
11th Aug 2017 16:38

Whether there is a partnership or a jointly owned investment is a matter of fact. The submission to HMRC of forms SA400 and SA401 is not one of those facts.

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By the_Poacher
11th Aug 2017 19:14

How are you going to transfer the properties into the company? You need to consider the CGT implications. There may be legal costs for transferring the legal title and don't forget to ensure you transfer the property at a fair value.

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