Limited company?

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    Limited company?

    Good afternoon all,

    A few years ago my father and I bought some houses to rent out. I bought them in my name as his credit etc wasn't great. However I now want out due to all the tax etc and also I just don't want to do it any more. He cannot afford to buy them off me, and I don't want to sell them - ideally I want my father to get the money from rental income but I don't want all the liability as I won't be receiving the profits.

    What are everyone's opinions on setting up a limited company? My thought is that I can effectively give him ownership and liability through the company so I can get away from the property game. I have never done anything like this before, it's just an idea so I was hoping for your experienced thoughts.

    Many thanks for your time

    #2
    I think a Declaration of Trust will take care of your father receiving all the income and he can do his own tax returns. However, that doesn't get you off of the mortgages. That would still remain your liability.

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      #3
      Thank you for your quick response. I want to remove liability from myself as I want to buy my own residential property and I don't want the extra liability for the rental properties. My (probably incorrect) understanding is that putting them into a limited company would take me away from the association with the rental properties?

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        #4
        Having rental properties won't stop you getting a residential mortgage. I'm assuming the BTL's have proper commercial mortgages?

        I don't believe LTD company is the way forward at all. If you transfer the properties to a LTD company I think they may attract various taxes.

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          #5
          Originally posted by Scutler View Post
          I bought them in my name
          He cannot afford to buy them off me, and I don't want to sell them
          You have to do one or the other, there is no choice, continue reading as to why,

          The houses belong to you, on the mortgage, ( and maybe the deeds ? ), not to you and your father.
          Any income from rental will be yours to sort out tax wise as you own the properties. ( unles 2 names are on the deeds ? )

          a ) You need the money from your father, Why, because if you want nothing more to do with the houses, you are throwing your money away unless you sell.
          b ) If you just want them renting out and you get NO income from them, then you have again, just thrown away hundreds of thousands of pounds, and you need to sell up.
          c) You buy your father out, sell every thing, and start again.

          Father can buy a house and rent it out if he wishes.

          Common sense dictates the following.
          You and father agree to sell the houses and divide the money between the investors when sold, and you have your thousands of pounds back, so does your father, and you both evaluate what you want to do, and separately.

          Job done.

          You say you don't want rental income from the thousands you have invested, and you don't want to sell. That is financial suicide.

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            #6
            I don't agree with ram.

            It seems you and your father own the beneficial interest in the properties, notwithstanding that only you are the sole (?) Legal owner. How have you been sharing the rental income - 50:50? I assume this has been reported to HMRC.

            Incorporation may be a good option - but could trigger CGT and SDLT. Incorporation relief might be available for the former.

            You will also have to deal with the mortgages. Some lenders are less keen to lend to companies.

            Have you spoken to your accountant about this?

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              #7
              I should have probably made clear that my father pretty much paid the deposits and it's not that I don't want to sell, I just don't think they have enough equity to sell without making a loss. My father would be happy to continue to rent them out but like I said he doesn't have the money to buy off me.

              My uncle is giving me accountancy advice but it's not his area so he is researching, but I was hoping this could be a way to simply pass the properties on to him.

              I know having btl won't necessarily stop me getting a residential mortgage but my wife and I aren't comfortable taking on a residential mortgage with the btl mortgages hanging over us too.

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                #8
                Note also that mortgages/loans are ignored for CGT purposes. This could mean that the CGT liability is more than the disposal proceeds.

                Has your father's credit rating improved enough for the properties to be mortgaged in his name only?

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                  #9
                  A limited company isn't likely to be a great option for your father.

                  I'd find an accountant, and talk about a partnership.
                  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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                    #10
                    I don't think transferring to a limited company would trigger CGT as I don't believe current values have risen sufficiently post 2008.

                    My father has recently been made redundant, hence the idea of him taking the properties off me in the form of a limited company (or partnership?) so he can make a living. He would then try and refurbish them well enough to sell at a profit with the rental income. Like I said he paid initial deposit so he has more interest in it than me really. I just thought we might transfer it into a relatively faceless company so I could move on with my life!

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                      #11
                      Its difficult to get a mortgage when you are redundant . Your father will find it difficult to get a mortgage and you need to consult a mortgage broker to find out if it can be had without your name as joint applicant

                      Transferring property from personal name into a company name is treated as a disposal by HRMC and you may be liable for cgt. You need to consider the profit arising from such disposal and whether the capital gain exceeds 22K (annual capital gains free allowance for 2 persons).

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                        #12
                        Originally posted by Scutler View Post
                        I should have probably made clear that my father pretty much paid the deposits and it's not that I don't want to sell, I just don't think they have enough equity to sell without making a loss. My father would be happy to continue to rent them out but like I said he doesn't have the money to buy off me.
                        If your father 'pretty' much paid the deposits - then why do you want him to 'buy' you out. Surely you would see the 'equity' as his?

                        Even though your dad has been made redundant, I understand there are mortgages available where you don't have to prove any earnings. An Independent Mortgage Broker could arrange this.

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