Can you transfer property to a limited company without paying stamp duty?

The reliefs that can apply

There are two genuine reliefs, and they cover different taxes.

Section 162 incorporation relief (Capital Gains Tax). Section 162 doesn't make the tax disappear. It defers the Capital Gains Tax due on the transfer until you sell or dispose of the company shares. If you never sell the company, the gain stays deferred. To qualify, HMRC requires you to be running a genuine business, not holding property as a passive investor, and to transfer the business and all its assets (except cash) in return for shares in the company. Read the detail and the qualifying tests in the incorporation relief chapter.

The SDLT partnership exception (Stamp Duty Land Tax). Where the property business is run as a genuine partnership, a registered partnership or an LLP, the partnership provisions in Schedule 15 of the Finance Act 2003 can reduce or remove the SDLT charge on incorporation. This is the closest thing to a "no stamp duty" route, but it depends entirely on whether a real partnership exists and how it's run.

Why most landlords still pay stamp duty

The partnership tests are strict, and HMRC sets the bar high. A genuine partnership has to be more than two names on a title or a married couple who happen to co-own a property. It needs the substance of a business run in partnership, with the kind of active involvement HMRC expects to see.

Single-property landlords, and most landlords with a small number of personally held properties, rarely meet that bar. For them, the transfer is a straightforward sale and purchase, and the company pays SDLT on the market value at the date of transfer. The company also pays the higher rates surcharge that applies to additional residential property: currently a 5% surcharge on top of the standard SDLT rates, with a further 2% for non-resident buyers.

Capital Gains Tax is the other side of the same coin. Even where no cash changes hands, CGT is charged on the uplift from your original purchase price to the market value at the point of transfer, unless section 162 relief defers it. The reliefs above can soften this, but for many landlords the honest answer is that some tax is due.

For the full breakdown of the costs and taxes involved, see the costs and taxes chapter.

Beware "no stamp duty" schemes

Because the real answer is "usually some tax is due", a market has grown up around promising the opposite. Landlords looking to move properties into a company without paying tax have been in the spotlight, with national press coverage and an HMRC warning on the schemes involved.

The two patterns to watch for are hybrid LLP structures and trust or company structures marketed as a way to avoid SDLT, cut Capital Gains Tax, and reduce Inheritance Tax. HMRC has issued a spotlight on hybrid partnership arrangements, and its view is blunt: these arrangements don't work, and people who use them may end up paying more than the tax they tried to avoid, plus interest and penalties.

The detail of how these schemes are sold, and how to spot one, is covered in the tax mistakes chapter on risky incorporation schemes. The single most important point bears repeating here:

A useful test: if a scheme claims to be "approved by HMRC", that isn't true, because HMRC never approves avoidance schemes. If it leans on a barrister's or KC's opinion, that often signals the promoter already knows the structure is likely to be challenged.

The point isn't that incorporating a portfolio is wrong. Done properly, by a qualified specialist, it can be the right move for the right landlord. The point is that the tax it attracts is real, and a structure built to make that tax vanish is the thing to be wary of.