Can I transfer any personal assets to my limited company?

When you incorporate your limited company, you may have assets which you want to transfer into it. But how do you go about this, and what tax rules should you be aware of?

In this guide, Kerry Newman, Head of SG Accounting explains how asset transfers work in practice.

Reasons to transfer assets

Transferring assets can help to reduce the amount of Corporation Tax your company pays on its first year of trading. The most common types of assets include computers and office equipment.

How to value your assets

To begin with, you’ll need to find and use the ‘market value’ when you value your assets.

The process of transferring assets is fairly simple, so long as you take a realistic approach to how much they’re worth.

For example, if you transfer older assets into your company, you should use their ‘market rate’ on the day of transfer, rather than the original price you paid.

The market rate should take into account the asset’s age, condition, and specification. You can research the second hand market online to help find valuations.

The longer the gap between purchase and your company incorporation, the harder it is to reclaim the full value of assets, although you can claim the cost of pre-incorporation expenses for up to seven years.

It is worth noting that if you purchased the asset solely for business use, you can usually expect to claim the full cost of the asset.

Records you need to keep when you transfer assets

Before you transfer the asset, you need to create an invoice from yourself to your company. Your accountant can provide you with a template for doing this. The document should include the following:

• Your name
• Address
• Your limited company’s name
• The date of the invoice
• Which assets are being transferred (description)
• The sale price

Keep any original invoices, as proof that you owned assets personally beforehand.

Once you create the invoice and confirm that the asset was purchased for business reasons, your company can reimburse you for the sale price listed on the invoice.

How the asset transfer works in practice

The purchase of business assets qualifies for tax relief but does not reduce your company’s profits. This is because the tax treatment of assets is dealt with via a system of capital allowances.

You can use the Annual Investment Allowance (AIA), which means the purchase qualifies for Corporation Tax Relief.

The starting rate of Corporation Tax is 19% for the tax year 2023/24 for profits under £50,000.

If you transfer a PC to your company, with a market value of £2,000, the company’s tax bill is reduced by £380 (19% of £3,000).

To ensure that no benefit-in-kind charges arise, make sure that any personal use of transferred assets is purely incidental after the date of transfer.

Can you transfer a car into company ownership?

You can transfer a vehicle owned by you into the ownership of your limited company, but it’s probably not worth it.

Importantly, Corporation Tax relief doesn’t apply to the transfer of cars.

If the car has outstanding finance on it, you will need to pay this off, as you can’t simply transfer a finance agreement to your company, as it is a separate legal entity to you – as a director.

As an individual – assuming the company car is likely to be used for personal reasons too – there are also benefit in kind charges to be aware of.

Each year, the company has to pay Class 1 employers’ NICs on the benefit provided to the employee. The employee pays additional PAYE income tax on the value.

The value of this benefit is calculated based on the CO2 emissions, list price and fuel type of the vehicle.

If the company pays for the fuel too, an additional BiK fuel charge also applies.

You might be better off financially simply to keep your car in your own name, and charge your company mileage.

Make sure you read our guide to how company cars are taxed.

Seek professional advice before you transfer larger assets

As you can see, there are many things to consider before you transfer assets into your limited company.

It is always advisable to speak to an accountant before you take any action. They will be able to advise you accordingly, based on your personal circumstances.