Partnership Property Incorporations

There are several tax advantages to incorporating a partnership property business. These include: 

• Eligibility for rollover relief on Capital Gains Tax (CGT) upon the transfer of a business as a going concern, provided the property portfolio is transferred in exchange for company shares. 

• The applicability of special rules for partnerships transferring a property business to a limited company owned by the partners, resulting in no chargeable consideration and therefore no Stamp Duty Land Tax (SDLT) liability on the transfer. 

• Potentially lower corporation tax rates going forward (compared with individual tax rates), and the ability to offset mortgage interest payments against rental income within a corporate structure. 

Here is an overview of the most common legal steps required to implement a partnership property incorporation: 

• Incorporate a New Company: The existing partners become the shareholders of the newly formed limited company. 
• Obtain a Professional Property Valuation: A professional property valuation by a qualified RICS surveyor should be obtained. 
• Draft the Necessary Legal Documentation 
• Review Any Mortgage Terms and Coordinate with Lenders: See the Mortgage Considerations section below. 
• Complete the Incorporation and Post-Completion Steps: This includes tax payments and filings, companies house filings and changes to the statutory registers of the company, HM Land Registry registrations, notification to tenants.  

If any properties have an existing mortgage, consider these three options based on your lender’s policies: 

1. Get Lender Consent and Transfer Legal Title:

The lender may allow you to transfer the title into the company, which can involve renegotiating mortgage terms. 

2. Redeem the Existing Mortgage and Arrange New Finance:  

• You can settle the current mortgage and secure a new loan in the company’s name. 

• This option may be time-consuming since the new lender will likely require a title review. 
• Directors may need to offer personal guarantees, and interest rates for corporate loans can differ.

3. Beneficial Interest Transfer: 

Beneficial interest transfers are a common method of transferring mortgaged properties from a partnership to a new company, which can be a way to circumvent some of the above issues. 
 
However, this is a high-risk approach as such transfers could breach the mortgage terms with the lender and we strongly recommend that legal advice is sought before proceeding with this option. 

For more information on buy to let financing please see here. 

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