Home loan transfer to a company

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ABank

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I read recently that where one is in negative equity that it would be a good idea to form a company and transfer the property and the loan to the company. Self employed income and rent would be lodged to the company. As Corporation tax is at 12.5% I would only pay this rate on my self employed income and I could use the money saved on tax to repay the loan. This is second income as I have PAYE income also.

I approached the bank to transfer the home loan to a company and they refused - is there anything else I can do? All advice welcome.
 
Sorry, there are several reasons why this will not work. For a start, company law would forbid it.
 
This advice was given by a very well renowned tax consultant who has advised clients to do this. Perhaps I have not explained it very well but if a company is set up it can have many objectives which could be eg property investment and consultancy, any overall profit is taxed at 12.5% and the remainder can be used to repay the company loan. It works if a property is in negative equity as the company can be liquidated when assets are disposed of.
 
ABank said:
I read recently that where one is in negative equity that it would be a good idea to form a company and transfer the property and the loan to the company. ... is there anything else I can do? ...
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Maybe write to the "well renowned tax consultant" and ask him/her to progress the mechanics of the transfers for you, although I can't see how having him/her on board gets over the immense hurdle of needing bank agreement to achieve anything (its their money, they hold the deeds, the contracts are with them, etc, etc.) Advising a course of action is rather different to taking that specific course of action.
 
Hi ABank

I think it's useful to have such ideas, but they have to be grounded in reality. You will need to get your tax consultant to specify how it works.

If it's an investment property in negative equity, the company could only buy the property at its current value and could only borrow the amount of its current value. You could not transfer in a loan in excess of the market value.

The supposed advantage of operating through a company is 12.5% Corporation Tax. But if the property is in negative equity, you are probably not making rental profits anyway, so tax doesn't really come into it.

If you are self-employed and you want to operate through a company, that is a separate decision. Opinion is divided, but I believe that in general, you are better off operating as self-employed and not as a company. However, I haven't reviewed that in the light of the changes to the tax relief on pensions, so it might be different now.

brendan
 
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