HMRC clearance s162 incorporation

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    HMRC clearance s162 incorporation

    I have 10 properties held jointly with my brother that we would like to transfer to our SPV ltd company. I work full time in our business and in addition to the usual maintenance and paperwork we also carry out all the upgrades including new kitchens, loft conversions, extensions etc and also any legal work including evictions, money claims etc and we would like to claim incorporation relief.

    Our accountant doesn't think it's possible to apply to HMRC for a clearance before we attempt this. There is lots on the internet that suggests you can.

    I don't particularly want to go ahead as the potential tax bill could be a lot!

    Does anybody know if it is possible to apply for a non statutory clearance for this sort of transaction? In addition to incorporation relief we would like to avoid SDLT under the partnership rules and would like to include this in any clearance obtained.


    thanks

    #2
    There are a number of people who claim that there are ways to transfer properties into a company structure without paying a lot of tax.
    None have seemed remotely credible to me (and I would benefit from being able to do this).

    I have yet to see any evidence that such a scheme has actually worked.
    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).

    Comment


      #3
      A friend is in the process of doing it, and seems fine from what is telling me.
      Basically, if you have a portfolio in your name, and you can prove you dedicated 20 hour a week managing it, hence is a "business", you can incorporate the portfolio into a Limited, without CGT and without stamp duty.
      That is what he told me, and believe me, Chris (my friend) is not naive or stupid, he would look for all the evidence that this is the case.
      Said that, I would be very very caution as well, and look for sign-off from HRMC as well, if possible.

      ps: I did not investigate myself since I have most of my portfolios in Limiteds and (my and my wife) SIPP.

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        #4
        My accountant and I have discussed this, and we came to the conclusion that there's no way of being sure that process works.
        You have to do it, submit a return and basically hope HMRC agree.

        I'd be very interested in finding out that HMRC do agree this process.
        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).

        Comment


          #5
          jpkeates,

          Pretty much the same as what I have been told. If I file tax returns as a partnership for a few years and then transfer it might be more difficult for HMRC to then claim I don't have a partnership and business but it's not guaranteed. As the properties would be transferred together the stamp duty would be 12% + 3% which works out as a lot.

          I think the legal position is clear that if you do actively work in your property business full time then it is a business and not an investment and the same regarding the partnership rules. The problem is that HMRC might decide to still pursue you. That's not really fair but I don't particularly want that hanging over me for years if it goes to tribunal etc

          Comment


            #6
            Originally posted by jackboy View Post
            Does anybody know if it is possible to apply for a non statutory clearance for this sort of transaction?
            You can always give it a go. HMRC may decline to answer it because, for example, they don not think the point is uncertain. So you would normally want to be able to explain why it is uncertain and explain the commercial reasons for why this incorporation is actually being done. HMRC's website gives a detailed list of things to include in the clearance.

            Originally posted by jackboy View Post
            In addition to incorporation relief we would like to avoid SDLT under the partnership rules and would like to include this in any clearance obtained.
            I don't know enough about SDLT clearances but thought that they were separate. I would expect that one of the key issues here is to show that you actually have a partnership. Just because you own property jointly doesn't mean you have one. And just because you file a partnership tax return doesn't mean you have one. And if you set up a partnership to get relief on the transfer to the corporate then the anti-avoidance rules in s75A would apply, meaning SDLT would be paid in full.

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