Do BICT Trusts Work for Buy to Let Landlords?

Lawyers argue beneficial interest company trusts allow landlords to avoid the new mortgage interest finance rules starting in April 2017 – but do they work?

A beneficial interest company trust (BICT) is a legal arrangement between a property owner and a company that deals with how income and expenses from a buy-to-let or shared house business are handled.

The benefit is the landlord remains the property owner, so no title is transferred, and no capital gains tax is triggered while the income goes through the trust.

Promoters of the scheme explain that barristers have provided a counsel’s opinion that the BICT process works.

The sticking point between BICT promoters and accountants who claim the scheme will not work is whether a mortgage lender should be notified of the transfer to a BICT.

Mark Smith of Cotswold Barristers said: “We are suggesting this arrangement does not affect the lender’s security because you are not changing the legal interest.”

Buy to let lending trade body the Council of Mortgage Lenders (CML) confirmed that they are reviewing how BICT might affect mortgage contracts.

“Depending on the lender, this may be covered in the terms and conditions of the mortgage,” said a CML spokesman.

“We are raising the issue with buy to let lenders for their views. They will have concerns about any arrangement that impacts on the affordability of the mortgage.”

HM Revenue and Customs (HMRC) also said they were aware of the BICT advice to landlords.

“If a tax avoidance scheme sounds too good to be true, then it almost certainly is. If you are considering entering a scheme, please seek independent professional advice or ask HMRC,” said a spokesman.

Promoters charge between £6,995 and £13,995 plus VAT for BICT advice.

Smith says 40 landlords have already bought into the scheme and his firm has inquiries from another 50.