Gary McKenna, consultant mortgage broker at Mortgages for Business explains what options are available to you when looking at transferring your buy to let property from personal to Ltd Co ownership.
Since the budget proposal I have seen a sharp increase in SPV and trading limited company applications from both existing and first-time landlords, with many of you asking me the same questions. One of which being “Should I purchase my next buy to let using either a trading limited company or an SPV?” - a question I have answered in my recent blog.
Another popular question, which is linked closely to this topic is: “Can my company buy my personal BTL property?” or “Can I transfer the property into my own limited company/ SPV?” – also known as a related transaction. In short, the answer is yes but the process is not the most straight forward due to variations in lender’s requirements - there are of course solutions.
As this is a subject which has been propelled into the spot light I have approached the SPV/ Ltd Co lenders to get an overall picture of the appetite in the market for related transactions. Here’s what I found out:
- The good news is in general most lenders operating in company lending will consider these applications
- The common trend from lenders is the property must be purchased (from the individual by the Limited company) at full market value. This means that stamp duty is payable if above threshold
- An area where lender’s start to differ is around the “deposit” some lenders like to see that the deposit is available as if it was a normal property purchase i.e. savings in an account which satisfies standard money laundering requirements for deposit funds. However, a select few lenders allow the deposit to be gifted by the individual to the limited company, most commonly as a directors loan
Of course transferring from a personal name to a limited company name doesn’t come without costs, so you will need to consider the following:
- Stamp Duty Land Tax on the sale to the limited company
- Capital Gains Tax
- Early Redemption Charges on existing mortgages and re-mortgage costs
The long term advantages of holding property in a company name appear to be beneficial to most people. In my opinion if you are looking to hold onto your property as a buy to let for a long period of time I would strongly advise you consider transferring ownership from a personal name to that of a limited company – especially if you are a higher tax rate payer.
I believe that the benefits over time will outweigh any costs involved. However, each case needs to be reviewed on its own merits, so I would advise you talk to your accountant before making any decisions.
Gary McKenna has left Mortgages for Business for pastures new. For more information or for any questions relating to this blog, please contact the Buy to Let Team on 0345 345 6788, where one of our consultant mortgage brokers will be happy to assist.
8th December 2015