Question: How do I move my properties into a limited company tax-efficiently?
I have many buy-to-let (BTL) properties personally and I want to ‘gift’ them into a company I set up with my sons. I keep going round in circles on the matter of land and buildings transaction tax (LBTT) (Scottish) and additional dwellings supplement (ADS) etc., as I do not want to have to pay it again (I have been told it would be capital gains tax (CGT) free too). I have been advised by my solicitor (and others) that I can transfer my unencumbered properties into the company and there is no LBTT, ADS or CGT payable as there is effectively no sale and no money exchanging hands. However, my understanding of this is that transferring/gifting unencumbered properties into the company is effectively ‘selling’ it at that date of completion at its current market value and CGT, LBTT etc will be payable again. What would be my tax liabilities should I gift them into a company?
Arthur Weller replies:
Answer: With regard to CGT, see HMRC’s Capital Gains manual (www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14530); this transaction will be deemed to be at present market value, and so there will be a CGT liability accordingly. For LBTT purposes, see Revenue Scotland’s guidance (www.revenue.scot/land-buildings-transaction-tax/guidance/lbtt-legislation-guidance/determining-chargeable/lbtt2007) that again the consideration will be deemed not less than the present market value. In relation to ADS, see Revenue Scotland’s guidance (www.revenue.scot/land-buildings-transaction-tax/guidance/lbtt-legislation-guidance/lbtt10001-lbtt-additional-dwelli-2). It is possible that you can be eligible for multiple dwellings relief, and consequently pay no ADS.