Changes in BTL mortgage relief in 2017 provided the catalyst for landlords to transfer ownership of their properties into a company to continue to maximise tax benefits.
Since then landlords have become increasingly sophisticated, with many using structures such as limited companies in refined ways.
Savvy parents
We have noticed an increase in the number of limited companies involving people under the age of 18 – a rarity even up to five years ago.
Where we once talked about the ‘Bank of Mum and Dad’ lending their children money to get on the housing ladder, nowadays it’s more a case of savvy parents asking to be the ‘Board of Mum and Dad’.
As a result, more brokers are also asking us whether minors can be shareholders in a limited company, and our response is: yes, they can.
As a result of more people purchasing property through limited companies to gain tax advantages for themselves or for their children, lending into limited companies is now Zephyr’s standard business model.
A typical set-up could include parents with a minimum 60 per cent of director shares between them providing a personal guarantee to the lender, with the 40 per cent of non-voting shares distributed between the children, and no one child owning more than 20 per cent.
This can be an effective way to plan a family’s properties for the long term, spread dividends and any profit to other family members as well as provide investors with potential returns they may not find elsewhere in the current savings climate. Children can also gain a stake in the business as it grows.
Zephyr carefully scrutinises BTL limited company applications that involve the children of property investors, including their parents’ level of experience.
For some parents, giving their children shares in a BTL property is also a way to help them onto the property ladder.
As such it can prove a cost-neutral approach for parents to cover accommodation expenses for their child while they are at university or even when starting out on their career.
