We get asked this often and the short answer is – yes.
But you might have to have some very deep pockets!
You as the seller
Where you are selling a property, it will be subject to capital gains tax unless it is the home that you live in. The tax payable will depend on the profit as well as your other income.
You may have to pay and early redemption charge (ERC) on the existing mortgage. Some lenders charge as little as £150 while some lenders charge as much as 5% of the loan outstanding.
You will have to appoint a solicitor to act for you.
Your company as the buyer
You will need to appoint a solicitor to act for you. As this is a first purchase of the property by the company, full searches would be required.
You will need a broker to find you’re a suitable mortgage. You will need a valuation survey carried out. There will likely be a set up fee for the new mortgage.
You will need a 25% deposit a as general rule.
You will need to pay stamp duty based on the property value as well as the additional 3% on the purchase price.
Companies also pay a small premium for mortgage finance (although the mortgage market changes all the time so this isn’t absolutely guaranteed).
Our experience
We have seen it happen where it was a low value property that was purchased recently for cash and before the refurbishment works had begun. This was a cheap and easy transfer of ownership due to the situation.
However, when the above costs are worked out, it can be quite prohibitive. Where a property has been owned for a long time, the capital gains tax is significant. Where the property is a higher value property, the stamp duty is significant. Generally, when all the costs are added up, you are faced with a choice:
- Transfer the property to a company, or
- Use the same amount of money as it would cost to transfer the property to a company, as a deposit for a new purchase in a company.
You may have to top it up a bit but essentially you now getting a second asset (to appreciate over time) and a second income stream (to compensate for the effects of Section 24 and holding the first property in your own name).
We offer this analysis as service however from a simple calculation most people come to the same conclusion – it can be done but you need very deep pockets!
