Dentist purchases a new home whilst simultaneously selling his current home to his business.

The Client
Dr A, referred to us by his accountant, initially planned to let out his current home and then purchase a new home to live in. He wanted to keep his current home as a long term investment as had no plans to ever sell.

The Challenge
Dr A and his wife, also a Dentist, were unaware that by not selling their current home they would be liable for the high rate of stamp duty on their new purchase which was being bought at £1.1m. The additional 3% would have been an additional £33,000. In addition, both clients are higher rate tax payers meaning they need to pay the highest rate of tax on the gross rental income received for the property. They had £200k in the business that if they withdrew from the company as dividends they would have incurred a bill of circa £80,000 which didn't leave much for their onward completion.

The Solution
Working with their accountant we explained the financing options available to the clients and the accountant. This resulted in us providing a solution that was tax efficient and enabled our client to use 100% of their net profit for the purchase.

• Main business had £200k net profit which they were intending to release as dividends (this would have resulted in a large tax bill)
• Clients setup a new Limited company to hold their buy to let property (called a Special Purpose Vehicle – SPV)
• They provided an inter-company loan from their trading business to the investment business.
• We raised a mortgage under the SPV to purchase their current residence. They raised 75% of its value with the leaving them to provide the 25% deposit from the company.
• They didn’t have the 25% deposit so part of the deposit was made up of the clients providing a Directors loan which was funded by the equity in their current home so again no cash required.
• This resulted in their SPV owning their home as an investment to let out AND released a 15% deposit for them to purchase their new home at £1.1m right on the River Thames and more importantly, close to their practice.