Limited Company Purchasing Property

freddyfreddy123

I run a small company in Cambridge; who provide Consultancy and Specialist labour for niche projects around the country.

Most of the work that we do is based in London (inside the M25).
We put our employees up in Travelodges/Premier Inns most nights during the working week. Working out at £350+ a week, each Employee. (Easily £2000 a month in total)

The company has quite a healthy cash-flow at the moment; Could it purchase a residential property to allow staff to stay during the week; allowing the company to invest it's money in a property, reducing costs on hotels, and still getting the job done?

What are the implications on a business getting a mortgage for a residential property?

Thank you.

holly_hobby

The Ltd Co will effectivly be the borrower and owner of the property.

Accordingly, affordability will be based on the audited books of the Ltd Co (notwithstanding suitable trading period has elapsed).

Of course, mortgage interest, and associated operating costs may be offset as part of normal tax offsetting procedures.

If you elect to levy an accomodation charge from your contractors for the facility, this obv has to be recorded as part of your normal accountig procedures.

LTV you are probably looking at around 65% - 70% max LTV - rate rise circa 0.5% - 1% above BMR as semi commercial borrowing.

The property is an asset of the Co and subject to CGT on disposal, and will naturally be embroilled in any liquidation of the Co (sold before closing down of Co).

Its unusual for a Ltd Co to be used to pch a propety other than for BTL -but not unheard of - in this case you are effectively purchasing this as staff accomdation (as your contractors are effectively employed by you and not the Client, to whom they service).

As the Ltd Co is not registered as trading as a property co - you will need to just check on whether you are permitted under your articles/registration to own residential property. (give your accountant a call).

As a general idea on whether you are in a position to pch (further to the above property ownership issue), speak to your business banker, they already have a relationship with you, and have evidence of the cashflow through your business account. (and their initial look at your proposition may not incur a fee).

Furthermore, seek advice from a whole of market commerical broker (your accountant may have a relationship with one or two).

Hope this helps get the ball rolling ....

Holly

PS - just thought, the other alternative could be for you to purchase the property under a personal BTL mortgage. And effectively let it to your Ltd Co, whom will deduct the rental income as a business expense (much as you currently do with your contractor hotel bills).

You will obv submit your net taxable rental income as part of your annual submission to HMRC.

This also means the property is kept outside of the realms of the Ltd Co & may be retained following the closure of the business etc.

So a couple of options there for you to consider (if you need any BTL guidance, just ask - lots of peeps here on the forum to happily assist )

H x

freddyfreddy123

Just a quick reply to thank you for a very comprehensive response..
I will of course come back at you with more questions, once I have grappled with all those acronyms.
D.

holly_hobby

No problems - don't forget to run it by your Accountant for their input and guidance too !

H