Private Landlords and Interest Relief

Alexander Accountancy Landlords Advice Burton upon Trent

As the restrictions on high rate tax payers claiming tax relief for interest payments bites even deeper many landlords are re-assessing their property investments and how they are managed.

Alexander Accountancy is advising more and more landlords about switching from private holdings and moving properties into limited companies, as the tax relief restriction only applies to individuals at this time. However there are increased costs, reduced tax allowances and a couple of potential pitfalls with Capital Gains Tax and Stamp Duty Land Tax that mean this may not be as straight forward as some make it sound.

Limited Companies

When property is moved to a limited company it is a change of legal ownership that triggers both Capital Gains Tax and Stamp Duty Land Tax events. There can also be associated legal and re-financing costs, increased administration and the prospect of paying interest at a higher rate. Plus, unlike private individuals, limited companies do not have an annual Capital Gains Tax Allowance. So the benefits need to be assessed before any actions are taken.

Deferring Capital Gains Tax

If the transfer is structured correctly Capital Gains Tax can be deferred until a later date. Meaning any gain triggered by transferring the property to a limited company is carried forward for tax purposes until the property is subsequently disposed of by the limited company. To make sure this will be accepted, clearance can be obtained from HM Revenue & Customs in advance which is always recommended.

Mitigating Stamp Duty Land Tax

It is possible the need to pay Stamp Duty Land Tax on the transfer to a limited company can be removed all together. The key test here is that it must be the incorporation of an existing trading business, relief will not be allowed if it is deemed to be property investment. Once again we recommend clearance is obtained from HM Revenue & Customs in advance.

What should you do?

Every case is different so we don’t offer a one size fits all recommendation. What we will do is offer a free assessment of your personal circumstances, and if appropriate recommend you meet with one of the specialist tax or legal advisers that we use for this work.

If this is something you would like us to help you with please telephone 01283 743851 or email in**@al*******************.uk and take advantage of our free review.