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This is an idea which seems to be ubiquitous at the moment. At ETC Tax, we have been talking to clients about incorporating their property portfolios for many years. However, one needs to think long and hard about the Client’s objectives.
Assuming one can demonstrate there is a business (but note no requirement to be a trade) one can usually incorporate in a tax neutral fashion. One does need to be careful about Stamp Duty Land Tax (SDLT) so it is convenient if the property business is being operated via a partnership or LLP prior to the incorporation.
But what is causing this sudden epiphany? Essentially, it is the restriction that will be placed, a few years hence, on obtaining tax relief on the payment of interest on mortgages for individuals taken out to purchase buy-to-let properties. The rules do not apply to either commercial properties or any properties owned by, say, a Company.
A summary of the pros and cons of operating a property portfolio are as follows:
As you will see, there is no ‘right’ or ‘wrong’ answer. Whether to incorporate a portfolio should be, like all tax advice, determined on a case-by-case basis with the client. Despite the message in the market, it is certainly not a “no-brainer!”
If you have clients with property portfolios who you want to help then please contact us for a discussion.