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Buying property off my parents via a limited company


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My Father recently passed away and has left his 6 BTL properties to my Mum. Some of these are unencumbered and others have high interest rates. We would like to transfer these to mine and my Brother's company and pay my Mum a wage from the rent. With the obvious cost of CGT and Stamp Duty will we have to purchase the properties? If so can she 'gift' us the deposit without physically transferring us the money i.e. buying the property at a 25% discount?

I'm on the waiting list for Property Hub Tax but if anyone has some useful advise I'd greatly appreciate it. 

Thanks

Laurie 

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Hi Laurie,

It is entirely possible to sell a property within the family at a big discount, as you say, effectively gifting the deposit without transferring the money. It's called concessionary purchase and a lot of lenders do it.

However, you will have to ask your accountant and solicitor regarding the CGT, stamp duty and paying mum wages from the rent aspects.

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Hi Lozza

There are lenders that will allow a purchase to happen between a family where no money changes hands. Ie the vendor (Your mother) discounts the sale by 25% and lender views this as equity being gifted. Doing so in a limited company is feasable technically, however the only lenders doing this are on the more expensive end of the spectrum. There is also the question of whether they would even consider the limited company to be family, it is after all a seperate legal entitiy to yourselves. Ive spoken to a few lenders about this and they didnt have a problem with the limited company structure, but i wouldnt assume all lenders felt this way.

The other thing that i would be concerned about would be the lenders attitude to such a sudden exposure. Would a lender want 6 properties on its books from inexperienced landlords all of a sudden? Would they only want to do one or two, meaning that you have to spread this around lots of lenders. That could be messy because the portfolio itself needs to be considered, so each lender would need to know what was happening with the others.

As for paying your mum a wage, an accountant needs to answer this question, but i suspect they would require her to remain a shareholder, or to be able to demonstrate she has an active role in the business. If the former, your mum remaining as a shareholder could really complicate things as lots of lenders want all shareholders to be directors, she would need to be on the mortgage and have 100% personal guarantee (meaning she's on the hook for all the mortgages as much as you are). These are all complications you would need to consider.

Be very careful here when you take advice, mortgage brokers dont understand the tax implications fully, and accountants dont understand lending criteria fully and so you might get conflicting advice. Each time you change the plan you need to go back and check it works both from a tax perspective and a lending perspective. You need to be absolutely transparent on both fronts because ive seen applications fall apart because of seemingly tiny details that nobody though would be an issue completely changing the risk for a lender...

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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