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Transferring & Buying a BTL Property Through a Ltd Company

Buy To Let

Transferring & Buying a Buy-To-Let Property Through a Limited Company

Before you even consider setting up a limited company for your property portfolio, you must beware you will be selling your existing property to a limited company (your new company) and will be liable for STAMP DUTY!!! plus the sale of your BTL’s to the limited company will involve redeeming any existing buy to let mortgages as well as arranging a new limited company mortgage. COST, COST & MORE COSTS!

“I have been there and it is ridiculously expensive” but there are good benefits in the longer run..

However you MUST take independent tax advice from a professional before you begin this journey of transferring and setting-up a BTL limited company!

Recently the government have been “hammering” private landlords with all the recent regulations and tax cuts. Many landlords will be finding their profitability seriously compromised. This has meant that Landlords are incorporating their properties into a limited company arrangement to avoid being hit with additional tax.

You “MUST” take independent financial advance from a specialist as it may not be economic for you to set up a limited company due to your personal tax complexions.

So how do you go about it..

Firstly you need to think of a company name and check that nobody else is using the same company name or one that is very similar. https://beta.companieshouse.gov.uk/company-name-availability

Choose who will be the directors and a company secretary (you must appoint a director but you do not need to appoint a company secretary).  Decide who are the shareholders (i.e owners). Identify people with significant control (i.e the owners) and allocate them share holdings and voting rights.

So what to do.. It is very simple, go to Companies House website ( https://www.tax.service.gov.uk/register-your-company/setting-up-new-limited-company ) to register and it is an online process and you will be set up within 24hrs and costs £12. Basically you will need to provide details, such as your new company name, trading address, the director(s) names, some personal information, details of the company’s shares & shareholders and what it does (SIC Code –https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/527619/SIC07_CH_condensed_list_en.csv/preview ).

To ensure you are able to obtain mortgage(s) in the future you must ensure you use the correct SIC code (standard industrial classification of economic activities) as certain mortgage provides are very strict on what codes are used.  In additional it is typically better to only place your properties in the company and keep other assets and business activities out of it, as this will make obtaining mortgage(s) easier in the future.

On the Companies House portal it will ask you to prepare documents agreeing how you will run your company. These are called “memorandum of association” basically a legal statement signed by all initial shareholders agreeing to form the company and the 2nd document is “articles of association” which are written rules about running your company and again agreed by the shareholders, directors and the company secretary.

Don’t worry.. the good news is that Companies House  during your registration of your these will be created automatically as part of your registration. HAPPY DAYS! STRESS OVER..

If you have a more complicated structure you may wish to ask an accountant to do this for you. It can usually be done for a few hundred pounds.

Once you are Official..

You will have received confirmation from companies house with your company number and as importantly you have now set up a limited company for tax purposes, and will now need to pay corporation tax on your company profits and must produce company accounts each year.

Therefore you will need to keep certain accounting records such as:

  • Record of all money received and spent by the company
  • Details of assets owned by the company
  • Debts the company owes or is owned
  • Stock the company owns at the end of the financial year
  • The stock-taking you used to work out your stock figures
  • All goods bought and sold
  • Who you bought and sold them to and from
  • All money spent by the company (i.e receipts, petty cash book, orders and delivery notes)
  • All monies received by the company, for example invoices, contracts
  • Any other relevant documents for example, bank statements

Next hurdles are to setup a business bank account and then transfer property into the limited company!

I am not going to bore you with how to setup a new business bank account, it is very simple and basically it is the same as setting up a new personal current account.

Now the expensive bit.. “You must take independent financial & tax advice from a professional” and speak with a broker to assist with getting you the best deal for your new mortgage(s), furthermore you will need a solicitor or licensed conveyor to carry out all the legal work with the transfer of your properties.

In order to transfer your BTL’s into a limited company, the properties must be legally transferred. However, there will be 4 main costs to consider:

  • Stamp duty
  • Early redemption charges on existing mortgages
  • Capital gains tax early
  • New mortgage(s) arrangements

Once you have redeemed the existing mortgage(s) and set up new mortgage(s) in  the company name, you are all set, now you just need to get them rented out and start making returns on your investment and planning for future growth and maybe world domination.

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