Question about transfer/sale of property to Ltd. Co.

[GTA_Slave]

Hello all,

I seek general help on what happens when selling/transferring property to a Ltd. company. I purchased a new property in April and let out the old one. I intend to transfer/sell the old property to a Ltd. Co. and already have a mortgage offer for the amount outstanding on the existing mortgage.

There is however one issue where the current value of the property is £75k higher than the current mortgage amount remaining and the market value placed on the old house by the new lender.

If Co. A is buying at that price then it needs to pay the £75k which it currently does not have. How do sales to Ltd. Co.s take place in such instances?

I hope that I've explained the scenario clearly and I'd be grateful for any help.

thanks

[Eric Mc]

Capital Gains Tax springs to mind.

[Alpinestars]

Is this your former home? Or buy to let?

Could be capital gains to pay by you when you sell it to the company.

Company will have to pay stamp duty.

Company can buy the property and in return issue shares and/or a loan note to you. It doesn’t have to pay cash.

[GR_TVR]

Alpinestars said:

Is this your former home? Or buy to let?

Could be capital gains to pay by you when you sell it to the company.

Company will have to pay stamp duty.

Company can buy the property and in return issue shares and/or a loan note to you. It doesn’t have to pay cash.

The company will also be liable for the additional property stamp duty, so add another 3% on to the standard rates.

[Alpinestars]

GR_TVR said:

The company will also be liable for the additional property stamp duty, so add another 3% on to the standard rates.

Yep. But SDLT is only on (any) consideration.

[springfan62]

GTA_Slave said:

Hello all,

I seek general help on what happens when selling/transferring property to a Ltd. company. I purchased a new property in April and let out the old one. I intend to transfer/sell the old property to a Ltd. Co. and already have a mortgage offer for the amount outstanding on the existing mortgage.

There is however one issue where the current value of the property is £75k higher than the current mortgage amount remaining and the market value placed on the old house by the new lender.

If Co. A is buying at that price then it needs to pay the £75k which it currently does not have. How do sales to Ltd. Co.s take place in such instances?

I hope that I've explained the scenario clearly and I'd be grateful for any help.

thanks

The answer is that you have £75k of equity in the property and you would loan that to your new company in the form of a Directors Loan.

[GTA_Slave]

Thanks for the reply, all - Spoke with the CA yesterday and it seems it will be Director's loan that bridges that issue with the difference.