Buy flat through business

OldNovice

Hello.
I'm an IT consultant working through a limited company.
I am considering buying a flat near where I seem to do most of my work at the moment to save travelling and get more sleep.

The plan is:
Change the industry of the company to include property.
Loan the company the purchase price from my personal flexible mortgage
Buy the property through the company
Pay myself back from the company when money comes in or I can transfer it from notice accounts (3-6 months probably) or maybe it's better not to repay the loan?
When I finish in that area rent out the property (possibly rent out a room while I am there also).
Might also consider looking for a high priced long term rental (corporate maybe) and if that turns up move out and maybe buy another or go back to commuting/hotels.

The reason for the loan to the company is for speed and would probably be cheaper than any other way the company could raise money short term. The money is there but not readilt available.

This would give a capital gains issue as the property would be owned by the company but I would expect to leave it rented out

The reason I am considering this:
Buying it via the company comes out of pre tax money (or corporation tax with the assett value)- I would incur higher rate tax if I took the money out to buy it myself.
Although as a buy to let it wouldn't make financial sense but if you take into account hotel/travel/time it probably does.
This money in the company is currently on deposit at about 5.5% and would be nice to diversify a bit.

Just wondered if anyone had any comments before I chat with my accountant in a couple of weeks.

leadhair

A few random thoughts. Take them with a pinch of salt:

I think it's a good idea overall.

Because you're living it for free sometimes, the taxman could treat it as a perk, and tax you on the value of the 'perk'.

You may no longer be able to claim hotels or subsistence expenses while living there. This could increase your personal tax liability

You should charge interest on your loan at a little above standard rates.

[I am not an accountant!]

silvercar

we thought of doing similar and were advised not to, wish I could remmeber all the reasons!

think of your exit strategy, the flat is owned by the company, any profit made on sale will incur further corporation tax for the company. if you take the hit on tax now and buy in your name, all the future growth is yours.

if you do want to take a loan/ mortgage to fund this at any point in time, you can get lower rates personally than as a company.

BobProperty

OldNovice wrote:

.....Change the industry of the company to include property......

You didn't set it up in the first place to do that? (along with anything else?)

As a generalisation it probably isn't worth it. You don't get the CGT allowance and taper relief when you sell it and the Taxman will probably see it as a benefit in kind. Talk to your accountant and see what they say.

OldNovice

The flat would be purely for work purposes so shouldn't be treated as a benefit I hope. Especially as not all my work is in that area and I have another personal residence. When I go to companies and they put me up in flats that they own it's not treated as a benefit - nor when they pay for a hotel.

As to claiming expenses - I wouldn't be paying them so that would be a saving.

Yep - I would have to loan on commercial-ish terms - but I would expect to pay it back within a few months. I think I could consider it low risk so give a reasonably low interest rate - I would have to assess my company and decide how dodgy I was .

As to exit strategy - I've a few ideas about disposing of assetts when it comes to that. Depends a lot on where I am living at the time.

OldNovice

BobProperty wrote:

You didn't set it up in the first place to do that? (along with anything else?) .

I don't think so but I may be confusing it with another company. It's not difficult to do (or didn't used to be) so not really an issue

BobProperty wrote:

As a generalisation it probably isn't worth it.

I keep having that feeling too - I usually go for whatever is simplest.
I think a lot behind the impulse is that it might be fun.

Another option would be to invest in shares through the company - is that possible?