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Can we transfer properties into a partnership then a limited company?

Question

We own six rental properties in Somerset (a couple are in our children’s names, who are both under 18) and we would like to transfer them to a new limited company. I heard you can transfer your rental properties into a partnership for three years first and then transfer to a company using incorporation relief to avoid all stamp duty land tax (SDLT) and capital gains tax (CGT)? 

 

Arthur Weller replies:  

What you are saying has become a popular quote. In theory, this may work. However, there are significant details that you have 'glossed over'. Firstly, would you be eligible for CGT incorporation relief on the transfer; can your rental property activities be described as a 'business'? Secondly, if HMRC challenged what you are doing on the basis that you are doing it to avoid tax, it could be that you would not get the partnership relief from SDLT that you are hoping for (FA 2003, s 75A). Thirdly, would you be able to transfer all your current mortgages into the company? There are other difficulties with what you have written. I suggest you consider first whether you can overcome these obstacles, and then speak to a tax adviser. 


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