Conveyancing for Limited Company purchase
by Raminder Uberoi — Posted on 28 February, 2020
Conveyancing for Limited company mortgages
The conveyancing process is far more complicated compared to a normal conveyancing transaction. Therefore, it is important to instruct experienced solicitors. This is something Starck Uberoi Solicitors can help you with. Our legal work includes:
- The IDs of all landlord directors and landlords of the limited company will need to be checked
- The Articles of association also need to be checked over to ensure that the limited company is entitled to borrow money and hold property
- A company search will then need to be carried out to identify the directors and landlords and check that there are no issues that may deter a potential lender
- All landlords of the limited company should take out Personal Guarantees from our solicitors
- The annual return of the limited company should also be checked for information on the directors and landlords
- Our solicitors will take into account any lender requirements when considering the best option for the limited company
- We will register the charge at the Land registry which should be done within 21 days, and the limited company will be liable for repaying any debt. If the deadline is missed there will be a charge
Is stamp duty payable when transferring property to a Limited company you are connected to? – HMRC and connected party rules.
If you own property in your personal name and transfer it to your Limited company at a significant undervalue or for no consideration, you are liable to pay stamp duty on the market value of the property as opposed to the undervalue.
For example, you own a property that has a market value of £200,000 and transfer it to a company that you are connected to. The company only pays £100,000 for the property, which is below the market value for the property. Even though the company has received the property at an undervalue, they must pay the same amount of Stamp Duty as though you had transferred the company in exchange for £200,000.
This rule applies in either of the following situations:
- The person who transfers the property is ‘connected’ with the company
- The seller is connected to the company and the company uses shares in the company to pay for the property
However, these rules do not apply if you are NOT a connected person.
For more information on the rules about a connected party, please consult the HMRC website here.
What is a Limited company Buy to Let property?
A Limited company is often set up by people who own property in their own name however want to set it up in a company’s name for certain reasons. Their property is then essentially listed as being owned by a company rather than by the homeowner as an individual. This is growing in popularity over recent years.
Managing a buy-to-let through a limited company can have tax advantages, but this depends on your intentions or the length of time intended to retain the property. A Limited company is usually free from any obligations or debts and are separate to the parties that set them up for accountancy, tax or insolvency reasons.
Why landlords choose to set up a Limited company for a Limited Company Purchase?
Landlords of a Limited company who are higher/additional rate taxpayers used to be able to claim back tax relief on their mortgage payments at their current income tax band. However, this was changed by the Government on the 1st of April 2016, to make it so that landlords can only claim back 20% of the tax on their buy-to-let mortgage. To view more information on the government’s changes on the tax rules for limited companies here.
By using a limited company, the way people are taxed differs. Ownership of the property being listed as an individual means that the money received from rent will be counted as income tax along with any other earnings.
Whereas if you choose to invest a property in your Limited company, the profit made is liable to Corporation Tax. This is usually 20% for tax that is either £300,000 or lower.
What we can do
We at Starck Uberoi recommend that you seek advice when considering changing the type of ownership of a property.
Our mortgage brokers will;
- Assess your personal situation and advise on the most suitable approach for you
- Advise you on how having a limited company will affect you financially in the future
- Process your full transaction through to completion
- Look at your mortgage costs to help soften the impact that the loss of tax relief could have on your income.
Do you need mortgage advice for your limited company purchase?
Starck Uberoi Solicitors has a partnership with Starck Uberoi Mortgages, our integrated approach means that we are able to handle all legal and mortgage transactions under one roof, our Mortgage advisors are able to sit down with our solicitors and discuss the transactions more efficiently, this relationship helps keep the client actively involved in each stage of the process so should there be any questions or issues, the client is able to raise them with their mortgage advisor and solicitor easily.
Independent Legal Advice
If you already have a mortgage arranged and a conveyancer in place you will require Independent Legal Advice. For more information about the Independent Legal Advice we offer for Limited Company Directors please read our recent article.
How Starck Uberoi can help
Starck Uberoi’s experienced commercial conveyancing solicitors can help you with your limited company purchase arrangements. For more information please contact us either by visiting our Conveyancing or Mortgage pages, or to book an appointment please call 020 8840 6640. We have offices located in Brentford, Ealing, Canterbury and London Belgravia. For an appointment at one of our offices, email us at email@example.com or give us a call on 0208 840 6640.
- Our London Mortgage Solicitors Offer Independent Legal Advice to Company Directors on Company Mortgage Conditions
- Get an online conveyancing quote from our West London property lawyers.
- The title split of your property and creating new leases
- What a remortgage is and how our mortgage brokers and solicitors can help with the process