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Stamp Duty as a Ltd Company vs First Time Buyer Relief


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Hi fellow property guru's,

Newbie here looking for some advice. 

I'm looking at setting up a SPV Ltd company to invest in some properties, initially I'm looking to flip a few and then build a BTL portfolio. 

My question is; If I purchase a property under a Ltd Co and personally do not own a property in my name (never have), then later purchase my first property in my own name to live in. Would I still be classed as a first time buyer and get the Stamp Duty (SDLT) Relief on my personal property?

Eager to find an answer to this so I can begin my property journey... Thanks in advance for all your advice!

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Hi Vips

I am in a similar situation, looking to purchase my first property as a BTL in a LTD company. I know the SDLT for buying in a LTD company is always the higher rate.

However, I would also like to know when coming to buy my main residence as an individual will the higher rate SDLT be applied or because the LTD company is its own entity will purchasing as an individual mean normal rate SDLT is applied.

Let me know if anyone has answered your question

 

Thanks   

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Hi Meighy,

No firm answers to my query, still doing my research by talking to friends and associates.

However from what I've read on various other websites, you are correct, the Ltd company is a separate entity therefore when purchasing your own property you will be paying the standard rate of SDLT. I'll try find a link to the source where I read this and share.

Hope the above helps!

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Hi Vips

Did a bit more research myself today, seems that way.

Found this;

Is the first dwelling purchased by a Ltd Company exempt from the 3% surcharge?
No - all purchases of residential property within a limited company are subject to the surcharge.

I own a rental property; will I have to pay the 3% surcharge when I buy my first home?
Yes – it is the number of dwellings owned by you, not the use to which they are put that determines whether the surcharge is payable.

I own a buy to let property in a limited company and now want to buy a home to live in – will I pay the 3% surcharge? 
A limited company is a separate legal “person” from you, so (in law) you do not currently own a “dwelling”. Consequently you will not have to pay the 3% surcharge when you buy your home.

From; https://www.mortgagesforbusiness.co.uk/news-insight/2017/march/stamp-duty-faqs/

Think ill try and get this confirmed from a mortgage broker/accountant. Then im ready to go!

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On 6/29/2020 at 3:13 PM, vips said:

Hi fellow property guru's,

Newbie here looking for some advice. 

I'm looking at setting up a SPV Ltd company to invest in some properties, initially I'm looking to flip a few and then build a BTL portfolio. 

My question is; If I purchase a property under a Ltd Co and personally do not own a property in my name (never have), then later purchase my first property in my own name to live in. Would I still be classed as a first time buyer and get the Stamp Duty (SDLT) Relief on my personal property?

Eager to find an answer to this so I can begin my property journey... Thanks in advance for all your advice!

A company is a separate legal entity so if you buy your first ever property, you should be treated as a first time buyer.

Jerome

Jerome@TaxAntics.co.uk

www.TaxAntics.co.uk
 

 

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On 7/1/2020 at 9:04 AM, meighy said:

Hi Vips

I am in a similar situation, looking to purchase my first property as a BTL in a LTD company. I know the SDLT for buying in a LTD company is always the higher rate.

However, I would also like to know when coming to buy my main residence as an individual will the higher rate SDLT be applied or because the LTD company is its own entity will purchasing as an individual mean normal rate SDLT is applied.

Let me know if anyone has answered your question

 

Thanks   

As you say, the company will pay the additional  rate and if you are buying a property and personally own no others or are replacing your main home, you will not be liable to the additional rate.

Jerome

Jerome@TaxAntics.co.uk

www.TaxAntics.co.uk
 

 

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  • 1 month later...

@TaxAntics

hi again

bit of conflicting advice given by the robs today on ASK248. Stating no matter how your first property is bought (ie; through a company) you will have to pay higher rate stamp duty.

 

i was just wondering if you have any documents to say buying through a limited company protects your first time buyer status or at least not having to pay higher rate stamp duty when personally buying your own residential property 

 

thanks in advance

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On 8/11/2020 at 11:41 AM, meighy said:

@TaxAntics

hi again

bit of conflicting advice given by the robs today on ASK248. Stating no matter how your first property is bought (ie; through a company) you will have to pay higher rate stamp duty.

 

i was just wondering if you have any documents to say buying through a limited company protects your first time buyer status or at least not having to pay higher rate stamp duty when personally buying your own residential property 

 

thanks in advance

I heard it and didn't think it was right, but I'm well past that point (first home about 25 yrs ago) so wasn't really paying attention. The properties are not owned by the person, they'll be on land registry as owned by ABC Ltd etc, so surely when you answer the question of whether you own a property, the answer is no, as you don't, you own shares in a company that owns property.

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It’s a relief for individuals. If an individual has never had an interest a residential property before anywhere in the world, they’re a first time buyer when they buy their first residential property. If they have an interest in a company that owns property, the individual is still a first time buyer when they buy their first residential property in personal ownership. The only exception is if the company happens to be a financial institution so if you’re lucky enough to own a bank, you’re probably unable to claim relief! This exception is actually designed to catch alternative finance arrangements where banks and the such like own property for their customers. I suspect the Robs were talking about not being able to get first time buyer status by transferring property to a company before buying another one but I missed the podcast so can’t be sure....

Jerome

Jerome@TaxAntics.co.uk

www.TaxAntics.co.uk
 

 

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Hi all,

Appreciate all the responses on this topic. Is there any documentation / legal opinions available which explain how "interest in residential property" is defined or should be interpreted? I would have also thought an SPV is a separate legal entity and would not impact a director's first-time buyer status however that could depend on how HMRC defines interest.

Thanks

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@vips If you never owned/inherited a property in your name or co buying with someone before, you will be classed as first time buyer. If you are buying a property with someone who already own a home, you will not be classed as first time buyer. Buying a first property in Limited company does not affect this status.

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  • 2 weeks later...
On 6/29/2020 at 3:13 PM, vips said:

Hi fellow property guru's,

Newbie here looking for some advice. 

I'm looking at setting up a SPV Ltd company to invest in some properties, initially I'm looking to flip a few and then build a BTL portfolio. 

My question is; If I purchase a property under a Ltd Co and personally do not own a property in my name (never have), then later purchase my first property in my own name to live in. Would I still be classed as a first time buyer and get the Stamp Duty (SDLT) Relief on my personal property?

Eager to find an answer to this so I can begin my property journey... Thanks in advance for all your advice!

Hi - interested by this. My understanding was that it was almost impossible to get a mortgage through a SPV/ LTD as a first time buyer, unless there were other appointed Directors of the LTD that could demonstrate mortgage history. This is regardless of your income/deposit etc. 

How have you got on with this approach? 

 

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@vips Purchasing under an SPV for the first time and not being a previous owner is similar to purchasing as a first time buyer with additional fees (stamp duty, solicitor etc). The credit checks will be done against the directors of the company, they will also need to provide personal guarantee even though property will be in company's name. This means the list of lenders on the market will be limited, not many may take the risks for first time starting (Banks would not from what I saw when I tried to check previously but do check with your mortgage broker). Should the company fail payments, then the directors would be liable. During the purchase you will need to provide personal guarantee for the mortgage payments and usually addition fees will be charged for this and you may need to find an independent solicitor (different from the one deal with your purchase)

Do check with your mortgage broker/solicitor about the process and advice as this is just from my experience. 

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The current guidance is a little ambiguous regarding what an interest in property means however the below taken from an archived HMRC webpage confirms that being a director of a company which owns property does not disqualify you from FTB relief.

SDLTM29850 - Reliefs: First Time Buyers - Circumstances where we consider that the relief can be claimed

When the purchaser:

  • cannot use the property as a residence immediately, but has an ultimate intention to do so as their only or main residence (this can apply even if the property is let in the short term)
  • has held an interest in mixed use or non residential property only
  • has a future right, (e.g. under the terms of a trust) to acquire an interest in residential property, but has not yet done so
  • has held legal title as a trustee, but is not a beneficiary of that trust
  • bought a building plot and constructed a residential property on that plot
  • is a director/shareholder or a company which owns an interest in residential property, provided that no direct interest has been held

 

The below is also an excerpt from the Questions and Answer section of the HMRC guidance paper.

Q26. I have shares in a limited company which owns a property for rental to tenants. I am purchasing another property which I will own direct. I do not own any other residential property. Will I have to pay the higher rates?

A26. No, shareholdings in a company that owns residential property will not be counted when determining if an individual is purchasing an additional residential property, although the company may be liable to the higher rates if it purchases residential property. As this is your first purchase of a residential property the higher rates will not apply.

 

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