intra group lending / property transfer

[isleofthorns]

I've got a property in my ltd company I want to move into a new wholly-owned subsidiary (it's non-trading and I want to move it to a new 'property letting' company). This newco will also be buying a second property.

I'm the middle of setting up the newco and am wondering what would be best with regard to equity vs loan funding, ie:

1) set up newco with enough equity from the parent to allow it to buy the properties?
2) set up newco with minimal capital and then make a loan to the subsidiary to buy the properties?

any pitfalls either way to consider? thanks

[skwdenyer]

isleofthorns said:

I've got a property in my ltd company I want to move into a new wholly-owned subsidiary (it's non-trading and I want to move it to a new 'property letting' company). This newco will also be buying a second property.

I'm the middle of setting up the newco and am wondering what would be best with regard to equity vs loan funding, ie:

1) set up newco with enough equity from the parent to allow it to buy the properties?
2) set up newco with minimal capital and then make a loan to the subsidiary to buy the properties?

any pitfalls either way to consider? thanks

Not amongst your questions, but IIRC intra-group SDLT relief can be clawed back if the group is broken within 3 years. So don't break up the group.

[isleofthorns]

yes, thanks.

One property will be bought in from outside, so stamp will be paid. The other is the creation of a new lease out off an existing freehold, so I'm guessing stamp will need to be paid on this one too.

[skwdenyer]

isleofthorns said:

yes, thanks.

One property will be bought in from outside, so stamp will be paid. The other is the creation of a new lease out off an existing freehold, so I'm guessing stamp will need to be paid on this one too.

Ah, misunderstood, thought the properties were moving from ExistingCo to NewCo.

New lease out of existing freehold = new SDLT. Presumably you can't transfer the freehold into NewCo to avoid that?

[isleofthorns]

Unfortunately not.. the freehold is due to be transferred to a management company (share of freehold for other lease holders), and this can only occur once the last lease has been created.