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Transferring your property portfolio into a limited company can provide tax benefits such as deferring and saving on Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT). Incorporation Relief allows landlords to delay paying CGT when moving properties to a limited company in exchange for shares, only paying CGT when the shares are sold. This relief is automatic and doesn’t need to be applied for.
To qualify for Incorporation Relief, landlords must show that their portfolio is managed as a business rather than a passive investment. For SDLT relief, the property transfer must be part of a partnership that demonstrates genuine business activities and collaboration. HMRC has anti-abuse regulations to prevent artificial tax-saving arrangements, suggesting partnerships exist for about three years before incorporation.
Benefits of incorporation include:
Incorporation Relief is a tax benefit that allows you to defer paying Capital Gains Tax (CGT) on properties when you transfer them to a limited company in exchange for shares. The CGT is deferred until you sell those shares.
When you transfer your property portfolio to a limited company, Incorporation Relief enables you to delay paying CGT. The new shares in the company have a reduced base cost for tax purposes, which may result in higher CGT when the shares are eventually sold.
To qualify for Incorporation Relief, you must demonstrate that your property portfolio is managed as a business. The size of your portfolio and the level of active management are key factors in this.
Yes, unless the transfer involves a partnership. SDLT is generally payable when properties are transferred to a limited company, but if the transfer is part of a partnership that qualifies as a genuine business, SDLT may be avoided.
A partnership involves two or more people actively managing a property business. It must demonstrate genuine business activities and collaboration. Partnerships must typically exist for around three years before incorporation to avoid SDLT and qualify for Incorporation Relief.
To demonstrate your property portfolio is a business, you must show active management and substantial operations. This includes managing tenant relationships, property maintenance, and business planning.
While Incorporation Relief defers CGT, it does not eliminate it. The CGT liability may be higher when you eventually sell the shares due to the reduced base cost. Planning for this future liability is crucial.
The process can be complex, involving legal, tax, and financial considerations. It’s advisable to consult with tax advisors, accountants, and legal professionals to ensure compliance and maximise benefits.
Yes, HMRC has anti-abuse regulations to prevent setting up artificial arrangements solely for tax benefits. A property partnership must be genuine and sustained for a significant period, generally recommended to be around three years.
At Marquess, we specialise in property tax solutions, leveraging expert knowledge to maximise tax savings while complying with UK tax laws and HMRC guidelines.
Our services cover residential and commercial property purchases, aiding investors and developers in portfolio restructuring.
Through thorough analysis, we identify tax relief opportunities in past or present transactions and advise on future tax-saving strategies.
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For tailored tax solutions, contact us at 01858414350 or email info@marquesstax.co.uk.
We offer a free initial consultation to review our clients’ individual circumstances and present potential solutions.
Our expert advisers will review a proposed transaction to ensure that any available tax reliefs have been identified and are claimed correctly.
We have comprehensive experience dealing all types of transactions and understand the practical implications and can help our clients to navigate common problems.
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