personal BTL leasing to own Ltd company for managing letting

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    personal BTL leasing to own Ltd company for managing letting

    Recently I read about personal BTL properties leased to own (i.e. Director same person) LtdCo to manage lettings. Instead of the term 'lease', terms like 'license' and 'tenancy at will' were also used. There are several folks on the web forums saying they are structured this way.

    The structure is: give personal BTL at a smaller 'value' to the LtdCo. LtdCo then lets the property at a higher rent (either directly or via an agent). LtdCo retains the profit, after deductions, for future business development. It can also pay salary/ dividend to the individual if it chooses to.

    Another potential advantage is: Since any mortgage payment on the BTL property can be included in the payment from the LtdCo to the individual, the new legislation (i.e. removal of mortgage interest relief) is circumvented without selling the existing personal BTL to the LtdCo.

    Since the 'income' received personally is very small, the personal tax liability is minimised. Also, since this 'value' received is small, below SDLT threshold, SDLT is not payable.

    I can't figure out whether this is an accepted method. Hence thought of checking with the forum.

    #2
    I've heard of a number of people selling these kinds of "schemes" and charging for seminars and for putting them in place.
    I, personally, don't think they're going to work - they're an obvious tax avoidance issue, and HMRC would want that to become evasion.
    But, not many people have actually done this and there hasn't been a challenge from HMRC, so it's only a belief of mine.

    I don't follow the point about interest relief, though.
    The scheme reduces personal tax by reducing the personal income and moving the majority of the income into the company.
    The allowance on interest works the same way for the landlord, who has the mortgage burden, and the restriction on the allowance remains.
    The idea is to set the rent to the limited company at the right point to minimise the tax due.

    The difficulty for most small landlords is the traditional barrier to running their business as a limited company.
    Getting the money out, and the additional costs over time (including the cost of ending the business, which is somehow never included in the examples published).

    Currently, you have a tax free allowance for dividends of £5k, so this could be used for most people.
    The government has said that will be reduced to £2k, but haven't done it.

    Any salary you pay yourself would be taxed as income, which reduces the efficiency.

    But the real risk remains that you could do all of the work and find that HMRC still wants the income tax anyway (so you have all the setup and operating costs and pay the same tax as now).
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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