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Buying and Selling Companies That Own Properties

Buying and Selling Companies That Own Properties

Buying and Selling Companies That Own Properties

Tax changes in recent years around the treatment of mortgage interest mean that holding property investments through limited companies may often be a more tax efficient option.

But suppose, having owned a property through a limited company, an investor now wishes to sell the property and realise their investment?  How will this work, and what should they do?

If an investor owns a property in their own name, then they can sell it.  If they are going to realise their investment, it’s really the only option.  But if the investor owns the property through a company, another option opens up.

They can, if they want to, sell the property to a buyer in, as it were, the normal way.  What this means in reality, of course, is that it is the company that sells the property: it’s not the investor themselves.  And it’s the company, not the investor, that then ends up with the proceeds of sale.  If the investor themselves is to realise their investment, then some way will need to be found to get the money out of the company.

If the buyer is buying the property to live in, this is likely, in practice, to be the only option.  The buyer will want the property not a company.  But if this is not the case – if the buyer is another investor – there is a further option available.  Instead of selling the property itself, the investor can instead sell the company that owns the property.  This makes for a more complicated transaction, but there can be significant benefits both for the seller and the buyer to doing it in this way.

The buyer gets a ready-made vehicle, which should be able to claim mortgage tax relief.  They will also avoid SDLT.  But the seller also gets the proceeds directly (rather than into their company), and may look to agree with the buyer some share of the buyer’s SDLT saving.

Detailed tax advice is always going to be needed on this, and a well-advised buyer is going to be mindful of latent tax liabilities in the company.  But transactions of this kind have been common in the high-end residential market in London for many years.  We may soon be seeing more of them between landlords.

Support for you and your business is only a click or call away at Kersey Solicitors in Ipswich or Kerseys Solicitors in Colchester.  Our Corporate team will be happy to arrange an initial online meeting to discuss your options when buying and selling companies that own properties.

Contact our commercial team at Kerseys Solicitors in Ipswich on 01473213311 or Kerseys Solicitors in Colchester on 01206584584 or email us at [email protected], alternatively you can visit our web site and click “Call Me Back” and a member of our Commercial team will be happy to contact you.

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