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UK trend among buy to let Landlords selling to their own LLC's

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  • 19-09-2016 6:27pm
    #1
    In the wind
    Registered Users Posts: 239 ✭✭


    Just read an article about the above happening across the water.
    http://flip.it/s7VUqO

    Anyone know if the law is/will be structured similarly here to make a similar move attractive?


Comments

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    #2
    Lockedout2
    Registered Users Posts: 402 ✭✭Lockedout2


    The appear to be getting rid of mortgage interest as a deduction so people are putting the property into a company to reduce the tax on rental income.

    We have various reasons why this does not work in Ireland.

    1. Rental income in a company is taxed at 25%.
    2. Rental income in a company is subject to a close company surcharge of effectively 15%.

    The sale to a company triggers a CGT liability. The sale within the company is subject to CGT and the proceeds are subject to CGT again to get them out.


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    #3
    dbran
    Registered Users Posts: 2,094 ✭✭✭dbran


    Hi

    Putting property into a trading company is usually a bad idea for the reasons already posted Lookedout2.

    You will only be paying the same tax as you would be if you were as an individual minus USC and PRSI.

    The real issue is the double charge to CGT

    However setting it up as a single purpose stand alone property investment company may get around this to some extent because you can just sell the company rather then the underlying property and thus pay cgt on the disposal of the shares just once.

    But overall there would still have to be a good reason to do this as there is no real benefit tax wise.

    dbran


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    #4
    lcwill
    Registered Users Posts: 259 ✭✭lcwill


    I have been wondering about doing it it order to lock in gains for properties bought within the period of capital gains tax exemption from 2011-2014.

    Im sure you know there was a capital gains exemption if you hold for 7 years but the exemption is pro-rated if you sell after more than ten years, effectively dilluting the amount of the exemption if house price increases are weaker in subsequent years:

    Example
    Say you bought in 2013 for 100,000
    By 2020 the property might be worth 200,000 and you have a exemption on 100k worth of gains
    Then price rises slow down and in 2025 you sell for 220,000 and you get an exemption on 120k/15 years*7 years = 56k

    The alternative would be to set up a company and transfer the property into the company just after the 7 year mark in 2020 with a value of 200k. This is a 'deemed sale' for tax purposes and you get the full 100k of gains with no CGT.

    Then you could either leave it in the company, or buy it back again having secured your maximum CGT exemption.

    Is this feasible?


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