PPR transferred to Ltd Company for letting

PPR transferred to Ltd Company for letting

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Client lives in property (their current PPR) and are setting it up to be let as a holiday let permanently. They have already bought another property where they will move to and that will become their PPR.

AS FHL regime is ending I am looking into setting up a Ltd company to transfer the property into before it starteds to operate as a let hence have a few questions:
1. If the property was transferred would it be be exempt CGT on PPR grounds? Just checking in case this mechanism precludes the PPR exemption for some reason.
2. I believe that the property would have to transfer at full market value and SDLT woudl need to be paid etc etc due to connected parties.
3. Existing mortgages would need to be settled and new mortgages put in place in the name of the Limited Company.
4. In terms of the accounting entries in Ltd Company, DR property with market value and legals etc CR loans with the mortgage and CR DLA with any equity?

Once I can cofnrim the above I can look into whether all the extra costs are worth it overall.

Thanks
Regards
Dave    
 

Replies (11)

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paddle steamer
By DJKL
17th Jun 2024 10:58

They perhaps ought to have sold the old property before buying the replacement property, thus body swerving the adverse timing re paying/recovering the additional SDLT on the new home. Should have talked to an accountant first.

Personally not very keen on residential properties within companies as amongst other things am fearful of future government intervention/meddling. (Say restricting treating interest as a Non Trade Loan Relationship Debit where funds used for purchase of residential property, or similar with less wriggle room once property within the company)

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Replying to DJKL:
By ireallyshouldknowthisbut
17th Jun 2024 11:46

Agreed. Seems an odd thing to do with a new gov coming in.

Im not doing any tax geared incorporations until I hear Reeve's first budget.

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Replying to ireallyshouldknowthisbut:
paddle steamer
By DJKL
17th Jun 2024 12:05

Catch is they may not bite you until their second term (presuming they win a first and second term)

All I know is housing is an election issue, house supply and pricing is an election issue, certainly Edinburgh's Council have been fiercely determined to prevent planning /licensing re short term lettings ( with lots of legal interventions), to me such trends will continue..

Maybe I am over sensitive because of the local issues up here, but as legislation spreads, as rent control areas are considered to become active (The 2016 Act introduced the idea of them, LA powers just not yet used/rent zones not requested), stuffing a property within the wrapper of a company seems a potential expensive mistake if HMG policy changes require a quick exit from the market.

Thanks (2)
Replying to DJKL:
VAT
By Jason Croke
17th Jun 2024 12:27

Housing is a big issue everywhere.

You may recall seeing reports from mainland Spain/Lanzarote and Italy as locals are protesting about tourists, specifically tourists who are occupying short term rental properties and nowhere for locals to actually live.

The same driving factors lay behind what is happening in Edinburgh, this years Fringe is going to be interesting.

My SIL is from Edinburgh originally but lives in Paris for years, her landlord (of several years) asked if she could move out and go "back home" during the Olympics so that he could rent her apartment to tourists. Paris has rules re. FHL too, same issue as everywhere else.

This is where we are at now, homes for quick profit, who wants people to actually live in them?

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Replying to ireallyshouldknowthisbut:
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By gogzyb
25th Jun 2024 15:31

I think the more likely change is to amend S162 so that incorporation relief is only available on the transfer of a trading business.

That would seem to be an easier option than trying to introduce some form of restriction into the loan relationships code.

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DougScott
By Dougscott
17th Jun 2024 11:03

Sounds right to me.

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By darren.austin
17th Jun 2024 13:14

You also need to consider ATED tax and reporting if the property is above £500k.

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By JB101
18th Jun 2024 09:23

OMG. One of my clients has just asked me to do a 30 day CGT report for him & his wife as they have just sold their (only) home to his investment company to "avoid any wealth tax the new Labour Government are going to bring in on the day they are elected"!
I hope I can get to him before its too late to stop him.
I thought he was clever (he's an electrical engineer) - but obviously not :(

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Replying to JB101:
paddle steamer
By DJKL
18th Jun 2024 09:35

Doubt any CGT reporting is due if it was PPR.

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Replying to DJKL:
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By FactChecker
18th Jun 2024 13:08

... which is, of course, only one of the many apparent misunderstandings lying beneath that unfortunate transaction.

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Replying to FactChecker:
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By JB101
18th Jun 2024 13:20

Exactly!

Update: Client's solicitor told him it wasn't as simple as he thought and he needed to talk to me (and his mortgage company) first. Luckily he is now not going down this route (having told me had already had).
I might put his bill up next year and hope he leaves!

Thanks (1)