Using company money to fund house purchase?

markwm

I have a rather unique situation(I would assume).

I run my own LTD company, which I own 100% shares. I have rather a lot of cash in the company account(£400k+). I myself have circa £50-60k in personal savings.

I don't currently own any property but would like to buy a house. Looking through various mortage sites I'm literally baffled with jargon but that aside some of these mortgage calcs do throw up some hair raising results.

The problem I have is that all my company cash would be subject to 32.5% income tax if I were to use it to buy myself a house(ie, withdraw a LARGE dividend). Therefore, I'm looking at getting mortgage, but at the same time I'm thinking my own company has the cash I need so why am I going to *another* company to borrow the money!!

Is there any way at all I can use my company's money to somehow better aid a personal property purchase? other than withdrawing a large lump sum and suffering mass income tax?

I've been looking at houses in the region of £300-£325k.

regards

Ian_W

I rather think you're asking this on the wrong board Mark as it's more to do with Tax than pure housing stuff.

Towards the bottom of the pure Money section is a board called Cutting Tax where some accountants and otherwise tax savvy folk post.

markwm

Ian_W wrote:

I rather think you're asking this on the wrong board Mark as it's more to do with Tax than pure housing stuff.

Towards the bottom of the pure Money section is a board called Cutting Tax where some accountants and otherwise tax savvy folk post.

Thanks! You're right I wasn't sure it was the best board. Will try the other.

Rick62

I think for something like this you should take formal tax advice, however my understanding (as an Accountant as well as a Mortgage Broker) is that the company could lend you the money. If the company charged you a market rate of interest then there should be no tax implications (so long as set up correctly) if it charged you a reduced rate of interest then the difference in interest would be deemed a benefit in kind.

wisbech_lad

Presumably the company could buy the property and then rent it to you at a market rent? Not much advantage to this though - you will be paying the rent out of post tax income, and if the company makes a profit on renting the house, needs to pay tax.

Alan_M_2

I'd say a Directors Loan was the way to go, talk to your accountant, there's usually a few hoops to jump through to make sure you've got it all in the right order but the savings can be enormous.

silvercar

Directors loan is the way to go, though you may pay tax on the benefit.

Or you could bite the bullet and decide that you are going to have to get the money out of the company at some point and suffer the tax penalty.

I had a similar situation and decided to take the money out and pay the tax. The risk is that the tax regime could be harsher at some point in the future.

Apparently years ago you could take the money out and put it back in just before the end of the financial year then, once the accounts have been audited, slip it back out again. Provided you can arrange something to tide you over your company's year end, you could get away with it. Allegedly - this could be an urban myth.

pusscat

I use a Directors Loan and deposit the cash into our offset mortgage account.
This means that the amount owing against the offset drops to a minimal level and I then use the "overpayments" to reduce the term and the capital owing of the mortgage.

I leave it there all year, and then at the end of the financial year my accoutant works out the most tax efficient way for me to take my salary, dividends etc for that year. I usually have to make a small contribution for the use of the money through the year, but it is generally a pretty small amount.

We are lucky in that we live of Mr Puss's money, my dividends/salary etc are just a nice bonus as and when, so we choose to take amounts at the most tax efficient points rather than having to pay me a set salary or dividend at regular intervals.

It is a pretty common thing to do (by all accounts) and I am sure your accountant will be able to hepl you do it in the most tax efficient way.


Puss

xx