SDLT and Incorporation

Is SDLT applicable

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As a property expert I come across a lot of strange ideas, especially now that people are pushing incorporation as a response to Section 24.  This was thrown at me by a mortgage broker as part of a scheme being offered (with all the usual useless guarantees about return of fees, legal costs etc- when we all know the promotoers will be long gone by the time HMRC get around to taking it to Court).

Here's one for a SDLT expert: Is there an argument that SDLT won't apply if a client puts his properties into a Limited company in which he is 100% shareholder as there has been no change in the 'beneficial ownership' of the property (and presumably then no 'transfer of value' for SDLT to apply to?)?

I couldn't see it but I'm not a SDLT expert.

Thoughts welcome!

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By Portia Nina Levin
18th Jan 2017 15:47

There is a change in beneficial ownership of the property. The individual owned the property and now the limited company owns it.

The fact that the individual owns the company, so that there is no diminution in the value of his estate, is neither here nor there.

If the company does not beneficially own the property, it has no right to the income.

Are you actually talking about one of these so-called beneficial interest company trusts? In that case the purpose of the trust is not to avoid SDLT, but to avoid legal ownership having to be transferred to the company. This seems to be a common misconception with mortgage brokers.

The scheme will involve transferring the properties to an LLP, using a deed of trust, and subsequently transferring the properties to the company using another deed of trust, without any change in the actual legal ownership taking place and without any refinancing.

Such a "simple" arrangement is highly likely to fall foul of the anti-avoidance provision.

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