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Property Incorporation

Incentify work with you to minimise the tax liability on your residential property portfolio now and in the future.

Owning a property within a company can provide residential landlords with many benefits. Incentify can
help you redefine the value of your property portfolio within the most efficient taxation structure.

With the loss of many historic tax reliefs, residential property investors are turning to SPVs (Special Purpose Vehicles) to buy property.

The Government has recently introduced many tax measures targeting residential landlords, which has caused a reduction in the benefits of owning investment properties with landlords having to pay a higher rate of tax on rental profits.

In April 2017, the Government introduced Section 24 of the Finance Act (2015) which restricts relief for finance costs on residential properties, meaning landlords are no longer be able to deduct all of their finance costs from their property income, to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs.

Further to this, from the 2020-21 tax year onwards another setback of owning properties outside a limited company is that you are taxed on all of your rental profit, no matter how you withdraw it.

This has increased the tax liability and operating costs for many property investors who are sole traders and who use mortgage finance.

As a result, it has made some investments including buy to lets unviable or even loss-making.

However, limited companies are still able to claim tax relief on the mortgage interest they pay, meaning a limited company can be a more financially attractive way of operating a property business today.

The many benefits of owning property within a company include:

Being subject to Corporation Tax at 19% rather than income tax of up to 45%.
Protection against personal liability.
Mortgage interest relief restrictions on a personal level do not apply to companies.
Flexibility in how much of your rental profits you withdraw, or re-invest.
Mortgage lenders tend to prefer SPV’s when making mortgage decisions.
Request a free assessment with our team to discuss your needs. We will answer all your questions without obligation.

What is an SPV (Special Purpose Vehicle)?

An SPV is a business entity and one that is formed for, as the name suggests, a closely defined special purpose.

So far as the property investor is concerned an SPV is usually formed for purchasing buy-to-lets or for a property development project.

A special purpose vehicle is most usually formed as a private company limited by shares, but an SPV can be any kind of business format including a limited liability partnership (LLP) or a public limited company (Plc).

Also, mortgage lenders tend to prefer limited company SPVs because it is easier to understand the lending risk involved as It will be free from any pre-existing obligations, debts, charges or legal claims which may otherwise affect their lending decisions.

The paperwork in filing accounts, is though, more cumbersome than a personal tax return, which is why it makes sense to engage taxation experts such as Incentify, from the very start of your buy-to-let property investment journey.

How can I reduce my tax liabilities if I have an existing portfolio of rental properties?

If you have an existing portfolio under your personal name and are considering incorporating them, you could face the dilemma of triggering Capital Gains tax (calculated at the current market value), as well as stamp duty.

It could be possible to benefit from incorporation relief (under TCGA 1992, s 162) which may allow the capital gains to be ‘rolled over’ into the base cost of the company shares.

This relief normally applies where the landlord transfers a business to a company in exchange for the company issuing shares to the landlord.

Furthermore, where the properties are held in a partnership it may be possible to transfer them without giving rise to an SDLT (Stamp Duty Land Tax) charge at all.

How We Can Help

Our tax specialists will work with you to review your current property portfolio structure and report their findings to you in the first instance. Following this initial assessment, we will work with you to implement any changes required to minimise your tax liability now and in the future.

You will have a dedictated point of contact throughout the entire process and our team can work with your existing professional advisors if you wish.
clients choose to use us as they will usually have an allocated Client Manager, supported by a strong team.

Our tax planning strategies will ensure you are eqipped with the tools, knowledge and support required to mitigate the tax burden due to recent legislative changes on residential properties.

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