Tentative Early Thoughts - Has anyone gone the Ltd route to Buy To Let?

[vwdan]

So, has anyone actually got this kind of thing on the go yet?

I'm potentially in a position to really start the ball rolling on getting a BTL, but I'd really like to hear from the been and done it crowd.

[Iliketax]

As far as I know the inter-company loan would not be subject to S455 taxation so long as you are a participator in both companies. And again from what I've read, interest doesn't have to be paid on the loan. These 2 factors differentiate an inter-company loan from a director's loan.

You might want to ask your accountant about the impact of the new close companies' gateway in s554AA (see draft Finance Bill 2017). This is still subject to change but may be problematic for new loans from 6 April 2017 and all loans made since 1999 from April 2019.

[EinsteinTax]

I have done a fair amount of investigation on this, both for clients and for my own BTL portfolio.

I switched all my personally owned BTL property to an SPV Ltd before the increased SDLT rates were introduced in April 2016.

There are a lot of factors to consider, but there is a much stronger case for the SPV Ltd company option for new purchases than for transfers from personally owned to Ltd. This is due to the SDLT and CGT costs when transferred from personally owned to Ltd. Also, the Ltd mortgage interest rates are typically higher than personal BTL rates and they also tend to be loaded for related transactions (transfer from personal to Ltd).

If you are into BTL for the long term and have more than one BTL property, it is definitely worth considering a Ltd. It's not always a clear cut decision though and, as Fred Bloggs says, it's very difficult to predict future changes in the rules for both individual and corporate BTL owners.

[SandyD]

What's everyone's thought on Brexit and investing in properties, if many Europeans suddenly leave - there will be a lot of empty properties around, and I expect rent will go down as not as much demand.

[SandyD]

Surely in the next budget or the one after, the chancellor will be applying the same BTL taxation to companies as well as individuals? Seeing as this was an obvious consequence of Osborne's policy on BTL, it is odd that he didn't bring all BTL under the same rules, corporate or not?

He just wanted to hurt individual buyers, he didn't want to offend large companies with large portfolios, remember there are companies who have millions or billions investment in properties. I think he will even offer them better deal now ( going from May's thread to lower taxation and deregulate companies etc) but am aware they may have exceptions specifically to target small companies like they did with VAT.

[Fred Bloggs]

Surely in the next budget or the one after, the chancellor will be applying the same BTL taxation to companies as well as individuals? Seeing as this was an obvious consequence of Osborne's policy on BTL, it is odd that he didn't bring all BTL under the same rules, corporate or not?

[jmann]

Agree also.

Spoke to my IT accountant about it recently. My portfolio is all personal at this time and I may in the future move it to Ltd and make use of certain allowances to negate the CGT and SDLT on transfer. Will speak to my property accountant when the need arises.

For new property purchases I would go Ltd as you can claim all expenses and run it like a business. An inter-company loan from your IT Ltd to your BTL Ltd can be used to purchase the properties - though I'm not sure how a lender would feel about that loan being used for the deposit.

As far as I know the inter-company loan would not be subject to S455 taxation so long as you are a participator in both companies. And again from what I've read, interest doesn't have to be paid on the loan. These 2 factors differentiate an inter-company loan from a director's loan.

The use of an inter-company loan could affect your ability to claim ER on your IT Ltd if you should want to in the future, due to it "investing" in the property company.

I am currently looking into this too. I was informed by a specialist property accountant that it was possible to structure SPV company without affecting trading company ER. I was quoted £2k for whole process including 1st year accounts. As for the interest on loan, I was advised it is always best to charge interest but you can set it very low.

[ChimpMaster]

I agree with maslins. The mini-group structure is something that seems to be growing with our clients. In interest if not necessarily in action, at least for now, but I expect this to change.

Agree also.

Spoke to my IT accountant about it recently. My portfolio is all personal at this time and I may in the future move it to Ltd and make use of certain allowances to negate the CGT and SDLT on transfer. Will speak to my property accountant when the need arises.

For new property purchases I would go Ltd as you can claim all expenses and run it like a business. An inter-company loan from your IT Ltd to your BTL Ltd can be used to purchase the properties - though I'm not sure how a lender would feel about that loan being used for the deposit.

As far as I know the inter-company loan would not be subject to S455 taxation so long as you are a participator in both companies. And again from what I've read, interest doesn't have to be paid on the loan. These 2 factors differentiate an inter-company loan from a director's loan.

The use of an inter-company loan could affect your ability to claim ER on your IT Ltd if you should want to in the future, due to it "investing" in the property company.

[Alan @ BroomeAffinity]

Tentative Early Thoughts - Has anyone gone the Ltd route to Buy To Let?

I agree with maslins. The mini-group structure is something that seems to be growing with our clients. In interest if not necessarily in action, at least for now, but I expect this to change.

[Maslins]

No right/wrong answer, but I think my opinion as things stand:
- if you want to build and expand a BTL portfolio, keeping LTV high, releasing equity when available to put as deposits on new properties, an SPV Ltd Co may be your best option.
- if you want to only buy very infrequently, with little reliance on mortgages (either buying cash, or with short term mortgages that you try to clear down quickly), my view would be still buy personally.
- not a good idea to buy through your existing contracting company. Partly due to risk (eg you make a mistake in your contracting work that's not covered by insurance and you get sued, if your BTL assets are in that company they're at risk), partly due to blurring the line between trading/investment, which can have tax implications.

As an accountancy firm, it's not a market we're looking to get into, but I imagine there will be growing popularity for the mini group structure, with two companies in it, one doing the contracting, the other investing in BTLs.

[DaveB]

Special Purpose Vehicle seems to be the way to go for doing this via a Ltd. Set it up and have Your Co. lend it the money for the purchase on appropriate repayment terms.

I'm not an accountant nor a mortgage adviser though.

[northernladuk]

I'm interested in this. I haven't started researching this yet but it's in my list to do.

[vwdan]

Just after some very general advice/words of experience really. It appears that going BTL through a Ltd company is now the way forwards and it's something I want to look towards doing in the next 6 - 12 months or so. At this point I'm just interested to hear from those who have actually done or tried it. Did you form a separate entity, share your contracting co (Don't think you can do this?) or start a subsidiary. What're the major hurdles and pain points?

Just for interest, my plan is to effectively have a break even situation in the medium term - just using rent to pay the mortgage and cover any costs. My real goal is to have the asset at the end - having had someone else pay for it day to day, basically. The theory being that I can then use that in my later years as equity.