Advice re-mortgaging BTL portfolio into a company
Discussion
Wondering if anyone has a view or experience on BTL mortgages within a company.
One of my parents has built up a reasonable BTL portfolio (circa £8.5m with £4m mortgages) but now has a bit of a problem.
They have been purchased gradually over a period of time as an individual, as there were tax benefits at the time of using this approach.
However, with the impending BTL rule changes removing higher rate tax relief on mortgage payments, these need to urgently moved into a Ltd company.
At present each property has an individual mortgage attached to an individual property. The advice is when ownership transfers to the company, the portfolio will need to be re-mortgaged.
Despite building up a relatively large collection of mortgages, we are wondering whether there are particular banks who we may not be aware of who are more amenable to this level of BTL lending to a company?
As always, all comments and suggestions welcome
EddieSteadyGo said:
Wondering if anyone has a view or experience on BTL mortgages within a company.
One of my parents has built up a reasonable BTL portfolio (circa £8.5m with £4m mortgages) but now has a bit of a problem.
They have been purchased gradually over a period of time as an individual, as there were tax benefits at the time of using this approach.
However, with the impending BTL rule changes removing higher rate tax relief on mortgage payments, these need to urgently moved into a Ltd company.
At present each property has an individual mortgage attached to an individual property. The advice is when ownership transfers to the company, the portfolio will need to be re-mortgaged.
Despite building up a relatively large collection of mortgages, we are wondering whether there are particular banks who we may not be aware of who are more amenable to this level of BTL lending to a company?
As always, all comments and suggestions welcome
What you are planning is massive and expensive ball ache because transferring into a company can trigger CGT and SDLT issues. It can be done, but you need proper advice from a tax advisor, which will probably cost you a five-figure sum.One of my parents has built up a reasonable BTL portfolio (circa £8.5m with £4m mortgages) but now has a bit of a problem.
They have been purchased gradually over a period of time as an individual, as there were tax benefits at the time of using this approach.
However, with the impending BTL rule changes removing higher rate tax relief on mortgage payments, these need to urgently moved into a Ltd company.
At present each property has an individual mortgage attached to an individual property. The advice is when ownership transfers to the company, the portfolio will need to be re-mortgaged.
Despite building up a relatively large collection of mortgages, we are wondering whether there are particular banks who we may not be aware of who are more amenable to this level of BTL lending to a company?
As always, all comments and suggestions welcome
Also, if they have mortgaged out gains at any point they may have problems.
Lenders - there are a number out there who'll lend to companies. You probably won't enjoy the terms when comparing the deals to historic BTL mortgages though. Seek out a good commercial finance broker.
Edited to add: Don't be surprised if you go to a lot of trouble and expense to do this, only to find that the government changes the rules again in order to catch you out.
13m said:
What you are planning is massive and expensive ball ache because transferring into a company can trigger CGT and SDLT issues. It can be done, but you need proper advice from a tax advisor, which will probably cost you a five-figure sum.
Also, if they have mortgaged out gains at any point they may have problems.
Lenders - there are a number out there who'll lend to companies. You probably won't enjoy the terms when comparing the deals to historic BTL mortgages though. Seek out a good commercial finance broker.
Edited to add: Don't be surprised if you go to a lot of trouble and expense to do this, only to find that the government changes the rules again in order to catch you out.
Good point on the broker - does anyone know a good broker who could help with this?Also, if they have mortgaged out gains at any point they may have problems.
Lenders - there are a number out there who'll lend to companies. You probably won't enjoy the terms when comparing the deals to historic BTL mortgages though. Seek out a good commercial finance broker.
Edited to add: Don't be surprised if you go to a lot of trouble and expense to do this, only to find that the government changes the rules again in order to catch you out.
Re CGT and Stamp Duty, we have paid for proper legal advice from counsel and think we have a reasonable way forward with that particular aspect.
EddieSteadyGo said:
13m said:
What you are planning is massive and expensive ball ache because transferring into a company can trigger CGT and SDLT issues. It can be done, but you need proper advice from a tax advisor, which will probably cost you a five-figure sum.
Also, if they have mortgaged out gains at any point they may have problems.
Lenders - there are a number out there who'll lend to companies. You probably won't enjoy the terms when comparing the deals to historic BTL mortgages though. Seek out a good commercial finance broker.
Edited to add: Don't be surprised if you go to a lot of trouble and expense to do this, only to find that the government changes the rules again in order to catch you out.
Good point on the broker - does anyone know a good broker who could help with this?Also, if they have mortgaged out gains at any point they may have problems.
Lenders - there are a number out there who'll lend to companies. You probably won't enjoy the terms when comparing the deals to historic BTL mortgages though. Seek out a good commercial finance broker.
Edited to add: Don't be surprised if you go to a lot of trouble and expense to do this, only to find that the government changes the rules again in order to catch you out.
Re CGT and Stamp Duty, we have paid for proper legal advice from counsel and think we have a reasonable way forward with that particular aspect.
You could try emailing Sarnie on here. He is a broker but I am not sure if he only does resi owner occupier stuff. Failing that email me and I will put you in touch with someone.
13m said:
<snip>
If it's a partnership currently you may be able to reduce the CGT and SDLT to zero. But make sure whoever is giving advice has some skin in the game. Doing it wrong could be financially ruinous.
<snip>
Yes, you're right. It does involve an individual, partnership and a preexisting limited company hence why the initial transfer costs can potentially be mitigated.If it's a partnership currently you may be able to reduce the CGT and SDLT to zero. But make sure whoever is giving advice has some skin in the game. Doing it wrong could be financially ruinous.
<snip>
It is a compete PITA - as things stand now it all works fine but you're right, having to make all of these expensive changes is very unfortunate.
However, continuing 'as is' isn't an option. With the government intending to count all individuals BTL as "income" with only marginal rate tax relief, it ruins what is otherwise a reasonable business.
Sarnie said:
I may be able to help.
How many properties are we talking about?
Is the company they will be transferred into, an already existing/trading Ltd Company?
Does your Father have any earned income? Or does it come solely from rental income?
Are all the properties in England?
It's actually my clever old Mum, not my Dad How many properties are we talking about?
Is the company they will be transferred into, an already existing/trading Ltd Company?
Does your Father have any earned income? Or does it come solely from rental income?
Are all the properties in England?
Number of properties circa 50
All are in the UK.
All income is from the property business.
Yes the company is already pre-existing and trading, and is owned by the same person.
EddieSteadyGo said:
Sarnie said:
I may be able to help.
How many properties are we talking about?
Is the company they will be transferred into, an already existing/trading Ltd Company?
Does your Father have any earned income? Or does it come solely from rental income?
Are all the properties in England?
It's actually my clever old Mum, not my Dad How many properties are we talking about?
Is the company they will be transferred into, an already existing/trading Ltd Company?
Does your Father have any earned income? Or does it come solely from rental income?
Are all the properties in England?
Number of properties circa 50
All are in the UK.
All income is from the property business.
Yes the company is already pre-existing and trading, and is owned by the same person.
Are all the properties in England? I know you've said they are all in the UK, but I asked if they were all in England? Eg are any in Scotland, NI or Eire?
Who is giving the SDLT advice? Many accountants seem to shy away from that and, on the face of it, the transfer to a company owned by the same person is a connected person transfer, deemed to be at market value for SDLT purposes.
While there are reliefs (such as multiple dwelling relief) which kick in on a portfolio transfer and reduce the rate of SDLT from the headline residential rate, I'm not sure how your mother will avoid a relatively large SDLT bill.
While there are reliefs (such as multiple dwelling relief) which kick in on a portfolio transfer and reduce the rate of SDLT from the headline residential rate, I'm not sure how your mother will avoid a relatively large SDLT bill.
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