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Transfer of property from Ltd co to Director

Transfer of property from Ltd co to Director

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I have a Ltd company that owns a BTL property. I want to transfer ownership to myself (I am a Director). There is a Directors Loan account which is in credit to about £100k. If the transfer is done at market rate what tax/stamp duty implications are there. Also the company has a mortgage on the property, could the lender insist this be repaid if the property ownership is transferred?

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By snopes
18th Feb 2009 19:22

Whether... keep the company or not, there will be a sale or distribution of the property by the company to the director who is a related party.

Because the director is a related party, for Capital Gains Tax purposes the sale or distribution of the property will be deemed to be a disposal at market value.

If the current market value of the property exceeds its original cost (+ expenses, etc), the company will have a corporation tax liability on the chargeable gain made on the deemed market value disposal.

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By Paul Scholes
18th Feb 2009 18:12

Quick 1
Hi Tim - before you do anything find out how to transfer or replace the company mortgage with a personal one. The lender will not leave the loan in the company if the property vanishes so you have to sound them out. Besides which, depending how much it is you will likely be breaking company law leaving the loan in the company.

If you are still able to go ahead then the next decision is whether to trf the property to you leaving the company intact or whether you want to let the company go, ie the property effectively comes out to you as proceeds of sale of your shares.

The down side to this is a potential double hit to tax, ie the company's tax bill when it sells to you, then your tax bill when you wind up the company. With deflated property prices I suppose that now is the time to do this.

Sorry to be short & sweet (in more ways than 1) but I have to go home.

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By billgilcom
18th Feb 2009 18:05

In reverse order....
If the company has a mortgage on the property then Yes you must check with your lender that a sale is possible otherwise you could end up in a number of ownership problems .

If you manage to transfer at open market value then there will be no tax implications if the value is below the 100K. Otherwise of course you might end up with an overdrawn participator's account and taxation due under S419 ICTA88 (25% tax on laon outstanding for 9 months after AP end) and cheap loan benefits (tax and Class 1A NIC),

I will leave the Stamp Duty implications to somebody else

regards and hope this helps
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