This Content Was Last Updated on November 5, 2015 by Jessica Garbett
Last time I asked about “should I own my BTL personally or through a company” the advice was that owning personally was better. Is this still expected to be the case entering 2016?
But regardless, what are the rules/issues if one I did buy one via a company, or sell my existing one to the company?
If anything the post 2016 regime makes corporate ownership of BTLs less attractive.
The issue is that personal CGT is more benign than corporate taxation on sale of a BTL, therefore its better to suffer the corporate tax hit on the dividend / profit extraction from co now, and have property value increase within more benign personal CGT regime, than defer tax by buying in the company and have a larger tax bill on sale and extraction from the company at retirement or plan B time.
Personal CGT is 18%/28%. Tax on selling a property in the company will be normal Corporation Tax plus either tax on dividend at normal rates (post 2016 increase of course) if the company is continuing or CGT at 18%/28% (on top of CT) (no entrepreneurs relief ) if the company is ceasing (and no ER on other reserves in company either).
You can do a discounted cash flow on the whole thing but with low interest rates it won’t change much. In essence, a smaller tax bill now or defer everything now and pay more later.
Also mixing trading activities and investing activates isn’t good from a risk mitigation point of view. IF you had a large bad debt in company, or an unexpected IR35 charge, you have some isolation via limited liability. Any assets owned by company would be at risk.
In terms of selling an existing BTL to company, it would need to be at market value so you would incur a personal CGT bill with no rollover or deferral option. Other than that, legally, its just a conveyance like any other.