If you know you're going to make a loss on a property, move it to your Ltd?

[d000hg]

General advice for people with BTL seems to be not to own the property through a Ltd, but personally.

But what about if you have a property to sell, and you know it will make a loss from the price you paid. Would it make sense to somehow transfer/gift/sell the property to your Ltd, then sell it from the Ltd so you can offset the loss against company income and catch a break on CT?

Say you bought a property for £100k with a 90-100% mortgage some years ago and it would realistically sell for £70k now.

Maybe the way you have to change ownership of the property makes this a no-no, but it struck me as a possibility. The Ltd does not want to let the property or hold on to it, it is an out and out 'how to minimise the loss' scenario.

[jmo21]

Surely HMRC would view this an artificial transaction to avoid tax?

[d000hg]

Surely HMRC would view this an artificial transaction to avoid tax?

It's artificial to choose which EU country to pay your VAT in if you trade in more than one. But that doesn't stop it being legal.

[Maslins]

I'd say that was a bad idea for a few reasons:

1) possibly stamp duty on transfer of the property from personal to company. Ok in your example numbers sounds like it'd be below the SDLT threshold...guessing you're not in the South East?! Also legal fees and possible estate agent fees (admittedly the latter probably avoidable)

2) the sale from you to the company would need to be at fair market value. If you bought it 5 years ago for £100k and it's now worth £70k, I'd suggest you should sell it to your company at £70k. Assuming it's sold straight on, the company would broadly break even and the capital loss would still sit with you. You'd be hard pressed to argue over those 5 years you owned it it retained its value, then in the couple of months between you selling it to the company and the company selling it on it suddenly lost 30% of its value.

3) capital losses within a company can't be offset against corporation tax liabilities anyway, only future capital gains.

Possibly you could attempt to argue as the company wasn't letting the property out, and period of ownership was short term, the purchase/sale of it wasn't a capital disposal but a trading one...but the first two points would still apply. You'd need to have a profit motive for it to be a trade, buying it then selling it within months for a fair bit less than you paid for it would be hard to argue against ("I thought it was a steal at 30% above fair market value").

[jmo21]

It's artificial to choose which EU country to pay your VAT in if you trade in more than one. But that doesn't stop it being legal.

If HMRC decided that was artificial and decided to go after them, then they would.

You wire in though and let us know how you get on.

[northernladuk]

It's artificial to choose which EU country to pay your VAT in if you trade in more than one. But that doesn't stop it being legal.

I don't think that compares to moving assets in and out of a company to offset personal losses and I am sure has a lot less measures in place to spot and address those actions either. Where you trade is a higher level business decision. Trying to purposely offset losses to a company is just bad management of that company. Different beasts.

[d000hg]

If HMRC decided that was artificial and decided to go after them, then they would.

You wire in though and let us know how you get on.

There's no need to take it personally if someone disagrees with you. Laws exist which govern what is allowed, and this is a question about those laws, not about personal opinions on the idea.

I think it's likely not permissible, but it is sensible to check.

[SimonMac]

As you can't gift some thing with a mortgage Shirley your LtdCo would have to have to pay you market value now rather than what you paid for it originally, so there would be no loss to write off unless you expect it to fall even further in value

[kingcook]

General advice for people with BTL seems to be not to own the property through a Ltd, but personally.

But what about if you have a property to sell, and you know it will make a loss from the price you paid. Would it make sense to somehow transfer/gift/sell the property to your Ltd, then sell it from the Ltd so you can offset the loss against company income and catch a break on CT?

Say you bought a property for £100k with a 90-100% mortgage some years ago and it would realistically sell for £70k now.

Maybe the way you have to change ownership of the property makes this a no-no, but it struck me as a possibility. The Ltd does not want to let the property or hold on to it, it is an out and out 'how to minimise the loss' scenario.

So you'll be kind of using your limited company as a Bad bank?

Sounds very dodgy, not even the government would consider doing that.

[jmo21]

There's no need to take it personally if someone disagrees with you. Laws exist which govern what is allowed, and this is a question about those laws, not about personal opinions on the idea.

I think it's likely not permissible, but it is sensible to check.

So I'm right then, glad we got that cleared up