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MVL closing a property letting company

How is the ditribultion treated on Closing a Buy to Let Company using a MVL

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I own 5 properties in my own name .

I also own a company with 5 properties I wish to close via an MVL.

The company has been using salary sacrifice to pay into a SIPP bot now I have hit the life time allowance.

The properties in the company are worth about 1,5 million and they are mortgage free.

I wish to sell three of them for about 1 million and transer out two via an exspecie dividend after entering a MVL.

I have talked to sereral accountants and got different responses.

There was a concensus if I were to sell all the properties and buy some flats that became holiday lets I would get BAR.

Some were fairly sure the distribution would be treated as capital and tax at 20% but only fairly sure, others told em they did not know,

I do know selling up and changing my trade would save me tax despite paying  stamp duty as I would get £100k of BAR relief, I would rather tough just sell up,

I asked my current accountant this question a little time ago so I thought I would ask here as some of the properties are coming to the end of their tennancy period and of the only possible route to avoid paying tax at the dividend rate of 38,1% is to get into holiday lets I would like to know as soon as possible

 

 

 

 

 

 

 

Replies (6)

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By Leywood
27th Jul 2021 14:41

When differenet accountants on here provide different responses, for free (**), how will you decide what is right and what is wrong?

** Why whould we?

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paddle steamer
By DJKL
27th Jul 2021 14:43

Some confusion I think within your understanding or expression of your understanding of what you have been told.

Re the disposal of your shares (because that is what your MVL is hopefully going to be), the company needs to qualify as trading to get BADR on the shares, letting property generally will not qualify as a trade.

Perhaps someone indicated the company might sell its properties (suffering CT) and reinvest in properties that might qualify as FHLs as a route (expensive re frictional costs) or perhaps they suggested that if the existing properties are residential their leasing might take on FHL characterstics for two years such that BADR might bite. (remember there is still CT to consider)

There is likely a fair bit of money in tax involved here so I would bite the bullet, take advice from a decent size firm and let them totally guide you, a DIY approach is likely to end up a shambles as you will very likely make inadvertent errors and mistakes that compromise any planning route being undertaken. (Any if you get a written statement of advice and follow it to the letter as a continuing supervised client if it goes [***] up you can then sue the firm)

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By David Ex
27th Jul 2021 14:59

BuytoletLtcCompany wrote:

I have talked to sereral accountants and got different responses.

Presumably you trust your existing accountant? Does his view agree with the majority of others you have spoken to?

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By ireallyshouldknowthisbut
27th Jul 2021 18:42

If you do a "ring round" of various accountants asking for free help then chances are anyone decent giving you a precise answer you can rely on is incredibly slim, as its unlikely they would have all the facts, and even if they did, you might get some 'tasters' of their ability but only a fool is going to tell you chapter and verse without a fee for their expertise.

But in general it looks like a 20% CGT rate would apply, but there will be a layer of "it depends" behind all of that.

Getting into holiday lettings is a whole other ball game. Just because it might help you tax doesn't mean its sensible commercially.

For figures of this size I would appoint a property specialist to review your situation. Most "run of the mill" accountants cant really do property tax very well, its far more specialist than many realise.

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Red Leader
By Red Leader
27th Jul 2021 19:48

Did the accountants give you the advice in writing? If so, compare the written advice carefully and you will probably be able to reconcile it. If not, ignore it.

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By Justin Bryant
28th Jul 2021 11:05

There is always a double layer of tax when you liquidate a property company. CT on the property gains and CGT on the share gains and Business Asset Disposal Relief will not apply on the latter unless they are FHLs.
https://library.croneri.co.uk/cch_uk/efhl/7-2

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