More and more of us are looking at incorporation to hold our properties in. We know this will help shield us from the mortgage relief that is being reduced year on year from next year up to 2020. Having property in a company also means that any profits are potentially taxed at a lower than if they were in personal names. Corporation tax which today is at 20% will be reduced to 17% by 2020.
However, where this may seem attractive from any new purchases the same cannot be easily said for an existing portfolio. There are two main reasons for this in that moving (or selling) your properties to a company can attract stamp duty and/or capital gains tax. The good news is that there are potential exceptions to this which you should be aware of as they may apply to you.
Capital Gains Tax
According to the Irish Times, there is an opportunity to use a CGT deferral relief on the incorporation provided these three aspects are taken into account:
- All of the assets of the business are transferred to the company;
- The business is transferred as a going concern; and
- The consideration for the transfer of the assets/business is satisfied by the issue of shares to the vendor.
Stamp Duty
In terms of Stamp Duty charges, where property is owned jointly, it may be possible to avoid the SDLT charge on the property transfer provided you can demonstrate that you are actively engaged in a property partnership business. Like the capital gains tax this needs to be proven based on a number of key facts (again courtesy of the Irish times article):
- A set of annual partnership accounts;
- A partnership tax return being submitted annually;
- A partnership bank account and any borrowings being in the name of the partners/partnership;
- A partnership agreement.
As always, make sure you seek professional advise from a accountant, tax advsior and/or solicitor. We have a number of handpicked experts within the yourbuy2let.com network that would be happy to help you.
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