18 February, 2016
Landlords of residential buy-to-let properties are being hit from all sides at present, with new rules coming into force from April 2017. Changes include what level of finance costs can be deducted from income before profit and a proposed new additional 3% stamp duty land tax charge on the purchase of properties additional to a person’s main home.
The new rules relating to deduction of finance costs will not apply to companies leading many landlords to consider putting their residential buy-to-let properties into a company, but there are other tax issues that need careful thought before taking such a step.
The transfer of property directly to a company by an individual already suffers a charge to stamp duty land tax at the relevant rate and from April 2016, this will include the additional 3%. In some circumstances and with some careful planning this stamp duty land tax charge on incorporation can be mitigated.
Even if you decide you can put your property business into a company, it may or may not bring you the relief from the extra tax on future purchases. Until the draft legislation is released on March 16th, it is unclear whether a company buying residential property will be hit if it already owns more than 15 properties, or if it will be exempt if it buys 15 or more properties in one transaction.
These potential changes are not set in stone however, as a group of approximately 800 landlords are currently funding an application for judicial review of the new legislation on the restriction of deduction of finance costs, partly on the basis that it is unfair for companies not to have to suffer this while individuals do. The judicial review process will however, take quite some time, leaving matters uncertain in the meantime.
If you would like to discuss this issues in more detail or would like to consider your legal options with our tax solicitors in Bournemouth please contact Sue Adams on 01202 294 566 or email firstname.lastname@example.org.