With the governments planned Restriction on Finance Cost Relief for Individual Landlords – many property owners are considering moving some- or all of their portfolio into a Limited Company. As a limited company, the property owner would then be able to deduct the entire finance cost as business expense. If the landlord considers themselves to be running a property business- in other words spending more than 20 hours a week running the business (or employing someone else to run the business)- they can transfer the properties across by simply by converting the business to company status.
When converting a business to company status Section 162 Incorporation may allow you to avoid the requirement to pay Capital Gains Tax. When the new business is set up any equity in the properties transferred across becomes shares in the new company and can be offset against any capital gain. As long as the equity in the properties exceeds any capital gain there should be no Capital Gains Tax payable.
In addition Land and Property Transaction Tax (LPTT) can also be reduced or even avoided if the properties are transferred from a partnership (e.g. husband & wife) into a Limited Company.