Transfer a Property into a Company

Transferring a property, or properties, from individuals to a company has increased in popularity recently Having both pros and cons to the new structure, it is important to ensure the change is right for you.

There may be a number of reasons why you would transfer properties into a company such as:

  1. You are looking to buy another property to live in and rent out your current property. If you keep the current property in your individual names, you will pay the higher rate of Stamp Duty Land Tax on the new purchase;
  2. The loss of mortgage interest relief for individual buy to let has made company buy to let where this relief remain popular;
  3. Paying Corporation Tax (currently at 19%) rather than Income Tax (currently 20% at the Basic Rate or 40% at the Higher Rate); especially when you are a Higher Rate Tax Payer; and
  4. Other tax planning.

The process for transferring the property and setting up the new structure is as follows:

1. Have an initial chat

Discussing the process and asking any general questions may give you a better idea of what it involves and whether it is right for you.

2. Take specific tax advice

We strongly suggest taking tax advice from a property specialist accountant as there may be tax reliefs and benefits available to you. They can also confirm whether the change is right for you looking at the tax benefits and the costs of the transfer.

3. Organise your mortgage (if needed)

If transferring is right for you, we recommend getting in touch with your mortgage provider. It is likely when you transfer the property from your individual names to the company that you will need a different type of mortgage i.e. a commercial Buy-to-Let mortgage. You may also want to instruct a mortgage broker to look at new mortgage offers following the transfer.

4. Instruct a solicitor

A solicitor will deal with the legal transfer of the property. This may also involve redeeming your current mortgage and dealing with a Lender’s requirements on any new mortgage. At this time, the new company can also be incorporated to hold the property.

5. Complete the transfer

Once the solicitor has reported to you on everything including any new finance documents, the documents will be signed and the transfer completed at the Land Registry.

Things to consider:

  • Unless you qualify for an exemption (please check with a tax advisor), the company may need tp pay SDLT on the value of the property that is transferred.
  • Commercial Buy-to-Let mortgages generally have a higher rate of interest.
  • Once the property is transferred to the company, if the company goes into liquidation or any other insolvency position, the property will be at risk.
  • If you decide to sell the property in the future, any profits from the sale will belong to the company and the company will pay Corporation Tax. The profits would then need to be distributed to the shareholders and further tax i.e. Income Tax would need to be deducted.
  • Company directors/secretaries are under a number of obligations to comply with Corporate Law including various director’s duties. The company must also file their accounts and confirmation statements online each year otherwise the company is at risk of being struck off the Companies House register. Therefore keeping on top of the admin is vital.

Legal Fees for Transferring Properties in a Company

 

Freehold

Leasehold*

Base fee – Market value less than £500,000

£850 plus VAT

£1,100 plus VAT

Base fee – Market value more than £500,000

£1,150 plus VAT

£1,400 plus VAT

Mortgage Admin fee for redeeming only

£200 plus VAT

£200 plus VAT

* Leasehold Admin Fee of £250 included in price

Company Formation

  • Recommended Company Formation Agent – Blue Sky Formations
  • Review of incorporated company articles – 1 hour

Refinancing Fee and Ancillaries

  • Treat as Company Buy-to-Let – starting at £749 plus VAT
  • ILA (if needed) - £549 plus VAT for first director and additional £149 plus VAT per additional director

If you have any questions or wish to discuss the process further, please feel free to get in touch with one of the Commercial Property Team at your local office or email us at info@attwells.com.