Tax advice is key
It is likely that your decision to transfer the property into a company is driven by tax advice. However, if it isn’t, then you should ensure you take advice at an early stage from a tax specialist and in any event before completion of any transfer. Different tax regimes apply for companies and it is important that you establish whether putting your property into a company is actually going to stack up financially. However, we do appreciate that tax is not the sole reason for moving property into a company.
You should also think about whether consideration will be paid by the company in return for the transfer and whether Stamp Duty Land Tax will be due on completion as a result. Even if your proposal is that no money will actually change hands, HMRC could well attribute a ‘deemed value’ for SDLT purposes and therefore tax advice on this aspect is key.
Together with Stamp Duty Land Tax, you should also budget for the Land Registration fee that will be payable on registration of the transfer. This will be based either on the amount of consideration payable by the company, or, if there is no consideration payable, the value of the property. Fees can range from £20 to £125 when transferring whole titles, depending on the value of the property in question, with the fees increasing for transfers of part or unregistered land.
If the property you are seeking to transfer is subject to a charge, and this will not be redeemed in full on completion of the transfer, you should discuss your plans with your bank relationship manager before incurring too much time or cost in transferring the property into your company. Your company is a separate legal entity and so, even if the same people are involved, this will be seen by the bank as a new borrower and you may be required to re-apply for lending in the company name. The bank will therefore need to agree to the transfer and are under no obligation to grant consent so it is important to get them on board. This could result in additional time and cost if, for example, the bank requires their own solicitors to carry out a review of the title and other due diligence for the property prior to agreeing to the transfer.
You should also check your property title to establish if any other third party consents are required in order to perfect registration of your transfer at HM Land Registry. For example, if the property is leasehold, there may be a restriction on the title which prohibits a transfer unless the new owner gives a direct covenant to a management company or a landlord to pay a service charge. In these circumstances, the company will need to enter into this covenant on completion of the transfer to allow the transfer to be registered at the Land Registry.
Any works carried out to the property during your ownership may have the benefit of construction warranties, particularly if the works were completed within the last 12 years. You will need to check that these can be assigned to the new owner of the property. The warranty provider may charge a fee for transferring the benefit of the warranties and may also limit the amount of times the warranties can be transferred so you should factor this in for any future plans you have for the property (for example, if you plan to sell soon after the transfer).
This is something that can easily be overlooked but could mean that the company is not able to benefit from the warranty cover should any works be defective and therefore potentially be out of pocket as a result.
Statutory compliance documents
You should ensure that any documents necessary to comply with any applicable regulations or statute for the property’s use and operation are transferred at the same time as the property transfer. For example, you may not be able to rely on certain property reports or surveys once the property is in the company’s ownership unless you take steps prior to the transfer to ensure the benefit of the reports/surveys are transferred across. This is because the benefit of reliance will often be limited by the provider to the person the document is addressed to.
Furthermore, if the property benefits from environmental permits such as discharge consents or water abstraction licences, you should contact the Environment Agency prior to any transfer of the property to the company to find out what steps you need to take to have new permits issued in the company name and what the timeframes are for achieving this.
Extent of the property being transferred
You should check that the whole of the land you occupy and are proposing to transfer in to the company is actually owned by you legally. For example, it may be that some of the land you occupy on an ‘adverse possession’ basis, where you have no legal title to the property but have occupied it without consent and to the exclusion of all others for at least 12 years. If that is the case, then this could require further steps to be taken prior to completion of the transfer to evidence the chain of occupation.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at September 2020.