Are you considering incorporating your property portfolio to offset the tax liability?
Beware, there are capital gains tax implications, and other issues to consider
Whilst incorporation of property businesses has been increasingly popular since the restriction of tax relief on mortgage interest for higher and additional rate taxpayers, there are a number of obstacles.
Is a bona fide property business being carried out? Can a tax-efficient incorporation take place without incurring a capital gains tax (CGT) charge? Is there going to be a Stamp Duty applied? This very often foxes people.
Sometimes there is a need to redo any mortgage linked to the property or properties. Lenders usually insist that the new company takes out a new mortgage, which is then used by the individual shareholders to clear their existing loans. This may be more expensive than existing arrangements, negating any tax benefits of incorporating.