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Giving Properties Away vs Transferring to Limited Companies.

Andy Morley

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So this is a question about Stamp Duty Land Tax (SDLT) on transfers of property. Capital Gains Tax and trusts also come into it.
Q1.  Has anyone managed to transfer properties from an 'active partnership' (properties held in joint names) into a limited company and then gone on to claim back the extra 3% SDLT successfully?
Q2. Has anyone transferred properties or part-shares of a property to one of their children and if so, can they confirm that SDLT is not liable if no payment is given in return?
Q3. Has anyone done a transfer of property to a trust they have set up for their children and what are the pitfalls there?

I've just read the thread about Limited Companies in this forum and I too wish I had put my properties into a limited company when I bought them.  My properties have about doubled in value over the past 10 years which seems like a nice problem to have, until you realise that anything else I might want to buy will have gone up by an equivalent amount too and meanwhile, I will loose a substantial chunk of that value increase in Capital Gains Tax.  I haven't made any capital gains elsewhere this year (surprise, surprise) so I want to use up some of our £12.3K allowance which is £24.6 for both of us. Our property portfolio is the obvious place to do that.   

I could transfer them piecemeal into a limited company, which would take a fair few years as I could only transfer part-shares of each property to avoid triggering CGT, so I have to ask if it's worth the hassle, given all the other issues, particularly the extra 3% stamp duty land tax.  As they are in joint names  there is in theory a possibility of claiming back the extra SDLT as my wife and I are 'active partners' and would be transferring to a jointly-owned limited company if we went that route. It does sound like an awful lot of complication though.  Then, there's also the likely return of regular stamp-duty to think about after the current 'holiday' ends, plus anything else that Rishi Sunak or his successors might do at some stage so I can't help think we would be holding ourselves hostage to fortune during that lengthy period when some of our portfolio was in the limited company, some was outside and some was 'halfway there'.  A bit like a hermit crab, leaving one shell to find a bigger one, so I can't help thinking that there must be a better way.

We could start to transfer shares of properties to one of our children which would have the additional benefit of reducing our Inheritance Tax liability (IHT), provided we survive for seven more years.  The straight transfer of a share of a property seems simple enough, three forms to fill from the Land Registry (AP1, TR1 and either ID1 or ID3 plus a £40 fee).  But what about if we wanted to transfer it into a trust for one or more of them?  A 'Bare Trust' would seem to be the best bet from an IHT perspective, so am I right in thinking there would be no SDLT liability there? This is what I've picked up from the gov.uk site.  But are there any complications here for the Land Registry transfer if I put it into a trust?  What would I put on the transfer form?

Thanks in anticipation!

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That post has to be one of the most complex questions ever posted here.

I'd be surprised if you get an answer. There are specialist accountants who deal with this sort of stuff and you'll very likely need to put your hand in your pocket to receive the information you need.

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33 minutes ago, Richlist said:

« That post has to be one of the most complex questions ever posted here. »

You need to beware of shooting the messenger, Richlist.  Life is complex, tax is complex, law is complex and above all else the times we live in right now are complex.  Some people simplify by burying their heads in the sand and their children pay the price, or rather, they pay the taxman.

Sure, you can put your hand in your pocket and get all sorts of 'good advice' but given the prices charged by fancy lawyers and accountants, you'll soon find you've spent more on them than you would get back on any tax savings unless you're pretty fly about it and being fly means being clued-up in advance.  There is no such thing as impartial advice, every 'financial advisor' or tax accountant has an angle, or a solution that they're selling and the idea that with something as complex as managing your finances you can just hand over some cash and 'receive the information you need' is to search for the proverbial crock of something or other that lies at the end of most rainbows of this kind.  The answer is to talk to lots of different people, make sure that you've got a pretty good idea of what you want to achieve and then and only then to engage with the professionals, steering them firmly in a direction that you know will benefit your pocket as well as theirs.

So, with anything complex, it's a question of not trying to swallow the whole salami all at once but to eat it in slices.  Has anyone here, any husband-wife 'partnership' say ever successfully transferred their rental portfolio into a Limited Company and then managed to claim back the extra 3% SDLT that's charged on rental properties and second homes?



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