Property in personal name sold to Limited Company

Property in personal name sold to Limited Company

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A client has sold a property to her limited company that she has equity in. How would this be accounted for? Example below:

Property valued at £150k
Mortgage on property in personal name was £100k so client had £50k equity
Mortgage of £100k in Limited Company

Am I right in the thinking the double entry is as follows which in effect shows the business as owing my client £50k.

Dr Fixed Asset - Property - £150k
Cr Directors Loan - £50k
Cr Property Loan - £100k

I probably haven't explained this very well so apologies.

Replies (7)

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By Paul Crowley
21st May 2024 23:27

Who does the loan company think owes them the money?
If she sold the property, what does land registry record as the owner?
If both are the company, then it looks correct to me.

Thanks (8)
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By FactChecker
21st May 2024 23:47

Or to put it the other way round ...

... OP's suggested entries describe the situation as set out in Post;
so everything's fine IF that situation is in fact the reality (as per Paul's 2 questions).

Thanks (5)
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By Londonacc
22nd May 2024 07:39

Thanks both

Thanks (0)
DougScott
By Dougscott
22nd May 2024 08:04

I think you would also capitalise the legal costs of acquisition, land registry fees, stamp duty, etc.

Thanks (3)
By ireallyshouldknowthisbut
22nd May 2024 09:20

Have they paid the CGT and SDLT on transfer?

or have they signed a magic bit of paper from propertry 118 that means all that goes away?

Thanks (5)
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By thevaliant
22nd May 2024 11:49

Accounted for?

Well, we need to know how much the client sold the property for? She did, at least, produce a sales invoice for the sale I would hope?

There are a load of other questions, not related to accountancy, which include but are probably not limited to:
1. Did she tell her mortgage company she sold the property?
2. Did she tell Land Registry?
3. How did the company get a loan on the property?
4. Did she use a solicitor to effect the sale? Did the company?
5. Has she and the company paid the correct amount of tax on the sale (whether SDLT, capital gains or whatever)?
6. Did she tell HMRC? Did the company?

Thanks (3)
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By Londonacc
22nd May 2024 13:44

All has been done above board with stamp duty paid and the new mortgage in the name of the business.

Thanks (1)