Incorporating an 18-property portfolio through a partnership, then a Family Investment Company

Sometimes. If the couple run the lettings as a genuine partnership, moving the properties out of the partnership to a company they own can use the partnership rules in Schedule 15 to the Finance Act 2003. The chargeable consideration is based on the partners' shares, so it can be nil. The conditions are strict and anti-avoidance rules apply. A sale straight from personal ownership to the couple's own company normally attracts SDLT on market value.

Properties owned directly by individuals and sold to their own company are charged SDLT on market value. Properties held by a genuine partnership are treated differently when they move out to a company connected with the partners. The partnership has to be real and run as a business, not created for one step. This couple already ran their lettings full time, which is why the route was worth testing.

The main risk is that HMRC treats the partnership as a step in a scheme to avoid SDLT. Section 75A can replace the actual transactions with a notional one charged on the full value. There is also a charge if capital is withdrawn within three years of property being moved in. We checked these rules for this couple and they were not a problem on the facts, but each case needs its own analysis.

No. Incorporation relief under section 162 of the Taxation of Chargeable Gains Act 1992 applied because the couple ran a property business and transferred it, with its assets, to the company for shares. The gain was not taxed then. It reduces the base cost of the new shares, so the tax is deferred, not removed. For transfers from 6 April 2026 the relief must be claimed.

It was for this transaction, which took place in 2024. For transfers made on or after 6 April 2026 the relief must be claimed, normally with the tax return for the year of transfer and with the information HMRC requires. The option to disapply it has gone. The date of the transfer decides which rules apply, so the position should be checked again for any new plan.

No. HMRC's non-statutory clearance service does not give clearance on matters of fact, such as whether activities amount to a business, but it can be used where there is genuine uncertainty about how the law applies. In this case we applied through that service. Whether a letting activity is a business depends on its scale, the time spent and how it is run, so the facts need to be recorded carefully.

They are two classes of share in a Family Investment Company. Freezer shares are held by the parents and capped at today's value, so the value they hold does not rise. Later growth in the company goes to the growth shares, held here by the children and a discretionary trust. That moves future growth out of the parents' estates. Setting up the classes and gifts still have inheritance tax rules to follow.

A discretionary trust lets the trustees decide who benefits and when, rather than giving the children fixed rights. That suits a family wanting flexibility. Here the couple, as settlors, are irrevocably excluded from benefiting. A lifetime transfer into a discretionary trust is an immediately chargeable transfer for inheritance tax, and the trust has its own ten-yearly and exit charges.

Splitting a company's shares into freezer and growth classes, and giving some away, has inheritance tax consequences that depend on value. The freezer shares needed a value that reflected the company's assets at that date, and the growth shares needed a value for any gift or subscription. Unquoted shares are valued as if sold on the open market. Here the valuation was prepared in house.

Section 24 restricts relief on finance costs for individuals, who get only a basic rate tax credit instead of a deduction. This couple had no borrowing but planned to borrow to buy more. In a company, finance costs are deducted under the corporate rules and Section 24 does not apply. Future borrowing would therefore not have been restricted if the portfolio was held by a company.

Yes. A company pays corporation tax on its profits, deducts finance costs, and can keep profits inside to fund further purchases. Taking money out personally brings further tax, so the plan depends on how much the family needs to draw. Buying through a company also has its own SDLT position, including the higher rates that apply to companies.

Under two months for the incorporation and the Family Investment Company, which included the non-statutory clearance application and the share valuation. The partnership had been formed earlier, in 2022. The time depends on the facts and on how quickly information and signatures are available. Complex mortgages, or a partnership that does not yet exist, will take longer.