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Ltd Company advantages - disadvanages
RDB
Posts: 872 Forumite
I am trying to work out if its worth me forming a company and selling my 2 BTL properties to it (I own 100% no mortgage) instead of me owning them.
The reason I want to do this is to simplify my life and myself having simple easy book keeping and self assessment every year.
The disadvantages I can see are paying 10% tax on 100% of the profit compared with now paying tax on profit only above mine and my wife`s allowance.
The advantages I can see are me having such a low income that I would qualify for tax credit and housing/council tax credit (we have our first baby on the way) and could rent a small flat or something.
Couple of questions I have.
Would the company be able to pay for things like leasing a car and mobile phone contract etc? If I work for the company and get paid max wage to suit, without affecting my benefits? What other things would be good expenses to lower the tax?
The reason I want to do this is to simplify my life and myself having simple easy book keeping and self assessment every year.
The disadvantages I can see are paying 10% tax on 100% of the profit compared with now paying tax on profit only above mine and my wife`s allowance.
The advantages I can see are me having such a low income that I would qualify for tax credit and housing/council tax credit (we have our first baby on the way) and could rent a small flat or something.
Couple of questions I have.
Would the company be able to pay for things like leasing a car and mobile phone contract etc? If I work for the company and get paid max wage to suit, without affecting my benefits? What other things would be good expenses to lower the tax?
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Comments
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Aint gonna happen! how is the LTD company going to get the cash to buy the properties?Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.0
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So you loan the company money to buy the houses off you. The company then has assets (the houses) and the company is owned by you, so you have a valuable company. This probably effects your benefit situation.
Add to that the company could be expected to pay you interest on your loan.
Add a CGT liability as you have just sold the houses to the company.
At some point in time you will want to get the money back from the company; so the company will have to sell the houses and pay tax on any profit and then that money will be passed to you and you pay tax.
Don't think it will be beneficial.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
So you loan the company money to buy the houses off you.
But where does HE get the money from to lend to his new company?
This is a vital question that needs to be answered, and the answer is.... he doesn't.
This sounds suspiciously to me like a failing BTL trying to offload the risks.Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.0 -
But where does HE get the money from to lend to his new company?
This is a vital question that needs to be answered, and the answer is.... he doesn't.
This sounds suspiciously to me like a failing BTL trying to offload the risks.
You need to stop reading with your prejudices and start reading with your eyes.
He has no mortgages on the properties, he owns them 100%.
You sound suspiciously like a BTL hater trying to offload resentment.0 -
You need to stop reading with your prejudices and start reading with your eyes.
He has no mortgages on the properties, he owns them 100%.
You sound suspiciously like a BTL hater trying to offload resentment.
Appologies to OP I mssed the No mortgages part.
No in fact he is a benefits cheat trying to conceal assets.
My mistake.Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.0 -
So the main problem so far is CGT if the properties are ever sold from the company?
I will sell them to the company (on a private very high interest only mortgage with me having a big charge on them) for not much more than I bought them for, within our allowance.
I always have thought the best way to avoid CGT is to never sell. Just use the equity. That's what I will do.
As to the benefit cheat accusation I am not going to be the directer of the company, I will just work for it.0 -
It is vital to get the right advice so you need to consult an accountant.A retired senior partner, in own agency, with 40 years experience in property sales & new build. In latter part of career specialising in commercial - mostly business sales.0
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I know thanks.
I am just planning it all out before I go there.
Isnt that what this forum is for? To share idea`s.0 -
I know thanks.
I am just planning it all out before I go there.
Isnt that what this forum is for? To share idea`s.
Yes totally agree about the forum but better to use to get a feel about what you are proposing to to do. I have read replies, to posts, where information being offered is wrong no matter how well meaning.A retired senior partner, in own agency, with 40 years experience in property sales & new build. In latter part of career specialising in commercial - mostly business sales.0 -
You need some serious advice from an accountant. If you think you can offload assets to a company to simplify your own tax returns you'll be in for a shock. Ltd companies have tons of paperwork and attract lots of interest from the tax man if you're doing dodgy stuff.
If you want to have more income without working for it then sell the properties and live off the interest from them.0
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