Are the stamp duty rules different when gifting to family?

Yes. You can gift a property for zero consideration to a family member, and the stamp duty is payable on the consideration, although you can't gift the property to a partner or family member's company as this will be viewed as a linked transaction as stated above.

Will a company always be subject to the higher rates of SDLT?

When a company buys a residential property, a higher rate of Stamp Duty Land Tax (SDLT) will typically apply. You might think that if the company doesn't pay anything for the property (like in a gift) and it's rented out on a long lease (over 21 years), they'd only pay the basic SDLT rate. However, this is usually NOT the case. Even with a long lease and no money changing hands, the company will likely still have to pay the higher SDLT rate (or the standard rates plus a 3% surcharge). It's very rare for a company to pay the lower, basic SDLT rate when buying a residential property. There are some exceptions, but they are complicated and don't usually apply to normal property purchases. What you should do: If your company is buying a residential property, it's essential to get professional advice from a solicitor or tax advisor. They can tell you exactly how much SDLT you'll need to pay and if any exceptions apply to your situation.

We can move your buy-to-let into your company name whether for market value or zero consideration.

The transfer can be completed quickly with our cost-effective panel of solicitors.

A man stood next to his house which is encompassed by a circle of arrows. SAM Conveyancing explains how to Transfer Property to a Limited Company Without Stamp Duty

Transfer Property to a Limited Company Without Stamp Duty

by:

Andrew Boast

Last Updated: 02/12/2024

Read by:

18,531

5 min read

Key Takeaways

You can gift property to a limited company and avoid stamp duty if you aren't connected to the company.
Stamp Duty for transferring property to a company you're connected to is charged at the current market value.
You can transfer property to a company without paying stamp duty if the property is already in a partnership.

In this article

Stamp Duty on transfer of property to a limited company

If a property is held under a company name, mortgage interest and other property expenses become tax deductible. This means that you can take these expenses off your income when calculating property income tax at year-end.

Most landlords gift the property to their limited company if there is no mortgage. Where there is a mortgage, you can transfer the value of the mortgage by getting a mortgage in the company name.

It doesn't matter what price you transfer the property for. The stamp duty rules are different when you transfer property to a company because they aren't based on the consideration, i.e. the money changing hands. The stamp duty is based on the property's current market value, and you'll pay the normal and additional stamp duty rates.

Legislation states you pay stamp duty on the property's market value on the transfer day.

Under section 53 of the Finance Act 2003, it states:

Deemed market value where the transaction involves connected company...The chargeable consideration for the transaction shall be taken to be not less than (a)the market value of the subject matter of the transaction as at the effective date of the transaction.

If you own your property in a partnership, then there may be no SDLT payable.

What is normally classed as consideration for land or property for SDLT?

Consideration is most commonly the amount you pay for the property, which is reflected on the contract between you and the seller, however, it can also be:

giving of goods (giving a personal possession in exchange for the land/property);
providing works or services (giving work or service in exchange for the land or property); release from debt; and/or
transfer of a debt, including the balance of an outstanding mortgage;

The above rules of consideration do not apply when transferring property into a limited company that you are linked to.

Avoiding limited company Stamp Duty: the process

One effective strategy to transfer property to a limited company while minimising tax is through incorporation relief. This relief is particularly beneficial for individuals with a property business, rather than a simple collection of property investments.

To qualify, HMRC stipulates that you must actively manage your property portfolio. This involves dedicating at least 20 hours per week to property-related activities, such as tenant management, property maintenance, and financial planning. Additionally, your portfolio should be sufficiently large to justify the time commitment.

Incorporation relief defers stamp duty and capital gains tax. These taxes are only due upon the sale of the property, the company, or its shares. If you choose to retain ownership of the property, you may never have to pay these taxes.

1Instruct a solicitor - they will help guide you through the relief claim process.

2Get a current market valuation of the property.

3Your solicitor drafts a legal agreement for the property transfer.

4Issue shares in the company to yourself equal to the market value of the property.

5HMRC and the Land Registry are informed of the transfer and your solicitor helps with the incorporation relief claim.

An alternative approach to transferring property to a limited company is selling the property to the company at market value.

This transaction will incur Capital Gains Tax on any profit between the original purchase and this sale. Additionally, the company will be liable for Stamp Duty Land Tax on the purchase price. Once the sale is complete, the property becomes an asset of the company.

1Instruct a solicitor - they will help with the legal process and conveyancing for a sale and purchase.

2Get a current market valuation of the property.

3Negotiate and agree on a sale price with the limited company.

4Your solicitor drafts and executes a sale agreement and the funds are transferred to your personal bank account.

5Capital Gains Tax (CGT) may be due on the sale; your solicitor will help you calculate this.

6HMRC and the Land Registry are informed of the sale and your solicitor helps with any Stamp Duty Land Tax payable if applicable.

Another method to transfer property to a limited company is to gift the property to the company.

This approach avoids Capital Gains Tax but incurs Stamp Duty Land Tax on the property's market value. In return, the company can issue shares to you, with the property's market value at the time of the gift serving as the share valuation basis.

1Instruct a solicitor - they will help with the legal process and conveyancing for a gift and purchase.

2Get a current market valuation of the property.

3Your solicitor transfers the property into the ownership of the limited company as a gift.

4Shares in the limited company are allocated to you based on the market value of the property.

5The limited company pays Stamp Duty Land Tax on the transaction based on the market value of the property at the time of the gift.

6HMRC and the Land Registry are informed of the gift.

You can also transfer property through a partnership. This process involves establishing a new limited company and subsequently transferring the property from the partnership to the newly formed company.

By utilising incorporation relief, it's possible to defer Capital Gains Tax until the property is eventually sold.

1Instruct a solicitor - they will help with the incorporation process.

2Form a partnership with the other owners of the property; this partnership owns the property before incorporation.

3Form a new limited company which will receive the property from the partnership.

4Get a current market valuation of the property.

5Your solicitor drafts a legal agreement for transferring the property from a partnership to a limited company.

6Shares in the new limited company are issued to the partners according to their ownership stake in the previous partnership.

7Your solicitor helps claim incorporation relief and updates HMRC and the Land Registry of the transfer.

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How do you know if you are linked to a company?

If you're not connected to a limited company, you can gift a property to the company. However, it's very unlikely that you'll gift a property to a company that you are in no way connected to because you won't see the benefit.

Under section 1122 of the Corporation Tax Act 2010, it states:

a company is connected with another person ("A") if:

You control the company: or
You, together with persons connected with you, have control of the company.

This means that not only will you be connected if you are the sole shareholder, you could be connected if someone else has control of the company and is connected to you by:

Your spouse or civil partner;
Your a relative;
You are the spouse or civil partner of a relative;
You are a relative of the shareholder's spouse or civil partner: or
You are the spouse or civil partner of a relative of the shareholder's spouse or civil partner.

If you are connected in any way listed above, then you cannot gift the property to the company, and you'll pay Stamp Duty on the property's full market value.

Limited company Stamp Duty calculator

3 rates of stamp duty could be applied to the current market value of the property:

Normal Rate
Additional Rate
Non-UK Resident

Property Price	Standard Rate of Stamp Duty	Additional Home Rate (updated post Oct 2024 budget)	Non UK Resident Rate
£0 - £125,000	0%	5%	2%
£125,001 - £250,000	2%	5%	2%
£250,001 - £925,000	5%	10%	2%
£925,001 - £1.5 million	10%	15%	2%
Over £1.5 million	12%	17%	2%

Use our free online stamp duty calculator to see what stamp duty you'll pay on the transfer to your company.

Online Stamp Duty Calculator

Frequently Asked Questions

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Written by: Andrew Boast

Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.

Reviewed by: Caragh Bailey

Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.

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