Transferring a 2nd home to a Limited Company

So, ignoring all wisdom about a housing slowdown I’ve gone and bought a house. I’ve decided to keep my old house, seeing as it’s fantastic and is more than paying for itself by being rented out.

The new house requires renovation however and that requires capital over and above what I have. I do however own a company and was considering selling the old house to my company and using the proceeds to complete the renovation in my personal house.

The company would then pay the mortgage on the old house (and of course benefit from the rental income).

On the face of it, this seems to be a very tax efficient way of paying a mortgage and freeing up some capital…..or am I deluding myself??

I’d appreciate any opinions out there…
Thanks!!

TonyC said:

On the face of it, this seems to be a very tax efficient way of paying a mortgage and freeing up some capital…..or am I deluding myself??

Click to expand...

The latter....probably. It is normally very tax inefficient for a limited company to own a rental property. Double CGT hit on sale and surcharge on undistributed rental income are among the main drawbacks. You should get professional advice based on the facts of your own situation if you are tempted to proceed with doing this.

Well first off your company will have to pay stamp duty when buying your house, and you'll probably have to pay CGT.

I'd talk to a tax advisor / accountant to get the full picture.

Not to mention a further Stamp Duty hit !!!

Thanks for those comments...back to the drawing board!!

You could transfer it into a self administered pension fund for yourself (as a Director) and therefore the 'pension' would not have to pay SD on the purchase or any Tax on the gains/income (as far as I know, not 100% on this).

However, I raised this point before here on AAM and the general concensous was that all these types of transactions should be 'at arms length'. So you would probably be opening a can of worms for yourself.

Interesting. I had my bank talking to me about such a thing before. Now is a good time to follow it up !!
Thanks for that, it's greatly appreciated!

A Self Administered Pension Fund cannot buy a property or sell a property to its member, whether at arms' length or not.

Brendan