Last week Mortgage Solutions polled brokers on whether they have seen an increase in the number of clients looking to move their buy-to-let portfolio into a limited company tax shelter. Less than half (46%) reported seeing an increase.
Martin Stewart, director of London Money, said that his firm insists that clients seek accountancy advice before they even think about viewing a property.
He continued: “It is not for us to advise anyone how to to structure a property purchase but we are happy to advise on the best way to finance a property purchase once they have chosen their preferred vehicle.”
Stewart also suggested that there is little appetite among landlords in the capital to transfer their existing properties into a limited company wrapper as this would mean they would have to “pay capital gains tax while also stuffing more money into the pockets of HMRC by paying double-bubble, stamp duty to buy their own property back off themselves”.
Andrew Montlake, director of Coreco, said that his firm had seen much higher demand for limited company lending from landlords looking at new purchases, but little movement in landlords looking to transfer their existing portfolio out of individual ownership.
He continued: “There is an awful lot of contradictory advice out there and difficulty with landlords finding tax advisors who really understand their situation. As an industry we have to continue to educate landlords as often as possible as to the changes as there are still too many who seem unaware of how it will ultimately affect them.”
Lenders are rising to the challenge
Intermediaries did praise lenders for the way they have reacted to the increased demand for limited company borrowing.
Montlake said: “Lenders have mostly risen to the challenge, with a wide range of choice for those borrowing in limited company names and also different ways of implementing the PRA rules. With rates also as low as they have ever been in the buy-to-let market, canny landlords who understand their business and have good advisers are in a good position to continue to build their portfolios.”
Daniel White managing director of White Financial Services, said that lenders have “really adapted” to this area of the market, with very generous rental calculations on offer from some.
He continued: “However, the restriction of a very small conveyancing panel from a couple of lenders could prove to become an obstacle to certain clients, especially those who have established relationships with their conveyancers who have the full knowledge and understanding of the client’s circumstances.”
There may be trouble ahead
Stewart argued that enthusiasm for buy-to-let has been significantly damaged by the “doubled-headed monster” of taxation and regulation, which will continue to change the face of buy to let for some time.
He added: “The next thing to possibly appear in the cross hairs of that double-headed monster is whether the shift to limited company buy-to-let is seen as an abuse of privilege. I’d be treading carefully in this sector if I was a client or a broker.”