Transferring Property into a Company
In recent years, transferring property owned by yourself individually to a company (also known as enveloping) has become very popular for a number of reasons including:
You are looking to buy another property to live in and rent out your current property. By keeping the current property in your individual names, you would pay the higher rate of Stamp Duty Land Tax on the new purchase.
Individuals letting out their additional properties have lost mortgage interest relief on their buy-to-let business meaning they cannot deduct the interest payments from their income. However, companies still benefit from this relief.
Companies will pay Corporation Tax (currently at 19%) on their profits rather than Income Tax (currently 20% at the Basic Rate or 40% at the Higher Rate).
Various other tax planning reasons including the individuals then gifting the shares to their children/beneficiaries to reduce their Inheritance Tax liability.
What is the process of transferring property into a company?
Have an initial chat: Discussing the process and asking any general questions may give you a better idea of what it involves and whether it is right for you.
Take specific tax advice: We strongly suggest taking tax advice from a property specialist accountant as there may be tax reliefs and benefits available to you. They can also confirm whether the change is right for you by looking at the tax benefits and the costs of the transfer. If required, we can put you in touch with tax advisors who can assist with advice on SDLT.
Organise your mortgage (if needed): If transferring is right for you, we recommend getting in touch with your mortgage provider. It is likely when you transfer the property from your individual names to the company that you will need a different type of mortgage i.e. a commercial Buy-to-Let mortgage. You may also want to instruct a mortgage broker to look at new mortgage offers prior to the transfer.
Instruct a solicitor: A solicitor will deal with the legal transfer of the property. This may also involve redeeming your current mortgage and dealing with a lender’s requirements on any new mortgage. At this time, a new company can also be incorporated to hold the property.
Complete the transfer: Once the solicitor has reported to you on everything including any new finance documents, the documents will be signed, and the transfer completed at the Land Registry.
Things to consider before transferring property into a company
Unless you qualify for an exemption (please check with a tax advisor), the company may need to pay SDLT on the value of the property that is transferred.
Commercial Buy-to-Let mortgages generally have a higher rate of interest.
If you decide to sell the property in the future, any profits from the sale will belong to the company and the company will pay Corporation Tax. The profits would then need to be distributed to the shareholders and further tax i.e. Income Tax would need to be deducted.
Company directors/secretaries are under a number of obligations to comply with Corporate Law including various director’s duties. The company must also file its accounts and confirmation statements online each year otherwise the company is at risk of being struck off the Companies House register. Therefore, keeping on top of the administration is vital.
If obtaining finance, you may be required to provide personal guarantees for the loan. If this is the case, you will need to consider your own personal circumstances outside of those of the Company and it is likely that you will be required to confirm you have received Independent Legal Advice with a separate solicitor on your personal liability.
Our legal fees for transferring property into a company
Timescale
- 6-8 weeks
When you are transferring property you may also need to obtain finance over the property. Therefore, you may also need independent legal advice if you are providing a guarantee as a director of the Company.
What is included
Without Finance:
- Reviewing Title
- Drafting transfer deed
- Obtaining redemption statement and redeeming current mortgage (if applicable)
- Obtaining and reviewing Leasehold Packs (if applicable)
- Registration of transfer with any third parties including landlords (if applicable)
With Finance
- Reviewing Title
- Reporting on your finance offer and legal charge and arranging the drawdown of your mortgage funds
- Drafting transfer deed
- Obtaining redemption statement and redeeming current mortgage (if applicable)
- Obtaining and reviewing Leasehold Packs (if applicable)
- Registering transfer at Land Registry
- Registering charge at Land Registry and Companies House
- Registration of transfer with any third parties including landlords (if applicable)
What is not included
- Tax advice
- Anything not listed as included above
- Land Registry Fees and SDLT may be due and will be payable based upon the purchase price
- Acting for an overseas company is an additional fee of £900 plus VAT
Property Finance
Attwells Solicitors are expert providers of Property Finance legal services. We have extensive experience acting for lenders, SMEs, and individuals on all types of property finance.
Property finance can be complex due to the many possible variations. Attwells are the ideal legal firm to support you through this process. We have a strong authority within the property sector and can advise you on all types of property finance.
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