Acquiring properties through existing LTD company?

bobins

Hi there,

I earn my living contracting through a LTD company that I am the sole Director and Shareholder of, for a selection of clients in the Creative / Advertising industry. The company has been trading for over 3 years with a turnover of roughly ~£70,000 and good profits.

Personally, I own one property worth ~£150,000 outright which is currently let for £650 pcm / £7800 a year.

I am currently looking at acquiring a few more rental properties and want to know if it would be more beneficial for me to do so through my company rather than personally. I have had a few chats with my accountant and it seems there are pro's and con's to both, I need to figure out which is going to be best for my situation.

I am also interested to know if it would be a good idea to start using my company to collect the rent for the property I own and currently let? The idea being that the revenue generated by the existing rental would be subject to corporation tax rather than a 'possible' 40% personal rate?

Thanks for any advice

insured

Usually it is not a good idea to own property through a limited company. Even though a small company is taxed at 20% you would still pay tax equivalent to 40% when you extract your profits.
However, if you have a limited company anyway, it may be beneficial, particularly if you have losses in your rental property.
Sometimes it can also be beneficial to own property through a limited company if the property has been owned for a while because a limited company still gets indexation.
In general, though, it is not beneficial.
However, you should speak to your accountant. What did they say?

bobins

Thanks for the reply.

How about owning the property personally but using the LTD to manage the rental?

So I would use the LTD company to collect the rent, etc.

chrismac1

There is one puzzling thing about this thread. You have an accountant who presumably has all the detail and has advised accordingly. Yet you appear to want advice from unknown punters on the internet who don't know the detail.

Either trust your accountant or hire one you do trust.

bobins

Haha. Thanks for your input.

To clarify, I do trust my accountant, wholeheartedly.

I am merely trying to establish a few of the general pro's and con's of the whole thing before I go onto discuss things in more detail with him. I like to know a little bit about what I am asking my accountant before throwing all kinds of crazy and wild suggestions around. Thats what you guys are here for right? ;-)

Seriously though, I am fortunate enough to be very good friends with my accountant so actually have his advice and support almost anytime of day, including weekends over a pint.

Ultimately the final say will come from him but as I said earlier, I just like to try and gather a basic understanding of these things, if possible.

Thanks anyway.

zygurat789

bobins wrote: »

Haha. Thanks for your input.

To clarify, I do trust my accountant, wholeheartedly.

I am merely trying to establish a few of the general pro's and con's of the whole thing before I go onto discuss things in more detail with him. I like to know a little bit about what I am asking my accountant before throwing all kinds of crazy and wild suggestions around. Thats what you guys are here for right? ;-)

Seriously though, I am fortunate enough to be very good friends with my accountant so actually have his advice and support almost anytime of day, including weekends over a pint.

Ultimately the final say will come from him but as I said earlier, I just like to try and gather a basic understanding of these things, if possible.

Thanks anyway.

Your accountant should be aware of all the facts and it is his professional duty to maximise your income and minimise your tax. If you trust him you should listen to him and do what he says.

System

bobins wrote: »

I am merely trying to establish a few of the general pro's and con's of the whole thing before I go onto discuss things in more detail with him. I like to know a little bit about what I am asking my accountant before throwing all kinds of crazy and wild suggestions around.
.

That's exactly the principle I apply before or during the process of consulting any professional.

Accountant, dentist, plumber, builder, etc - you can't discuss things intelligently with them in ignorance - I like to do some research first and then quiz them and make them explain things. They are the experts, but I am in charge and am employing them to advise me. I need to be in a position to confidently accept that advice.

bobins

Clifford_Pope wrote: »

That's exactly the principle I apply before or during the process of consulting any professional.

Accountant, dentist, plumber, builder, etc - you can't discuss things intelligently with them in ignorance - I like to do some research first and then quiz them and make them explain things. They are the experts, but I am in charge and am employing them to advise me. I need to be in a position to confidently accept that advice.

Absolutely!

My accountant is obviously aware of all the facts and as I said, we have already had hypothetical 'what if' conversations about the best way for me to proceed. This isn't a black and white set of circumstances, there is no clear route to take. There are obvious advantages and disadvantages to both. I am merely trying to establish what they are / could be. Thanks anyway.

Thank you to the few who took the time to offer some constructive advice / opinions. Very much appreciated.

To the 'robotic' responses - keep crunching those numbers folks. :T

Many Thanks,

holly_hobby

bobins wrote: »

Thank you to the few who took the time to offer some constructive advice / opinions. Very much appreciated.

To the 'robotic' responses - keep crunching those numbers folks. :T

Many Thanks,

Sounds to me as though you don't think you friend has enough experience/exposure in the area, which is why you are after some supplementary advice on here (please be gracious even to those whose opinion you may not agree with/don't suit your objective, they have taken the time to answer at no charge to you and have made valid comments re you choosing not to wholly rely on your accountants advice, and really don't deserve such a churlish response ).

That said ...

Ltd co

Which, AFAIAA, as the business will be property management, and completely separate to the current advertising company you operate, will need to have its own ltd co status - esp if mges are to be sourced).

Funding is v difficult in todays market, with sourcing BTL mges for Ltd Cos restrictive if available at all.

Tax

Corporation tax on net trading profit and in the event of a chargeable gain by the co. Which may make holding the units under a separate company (as oppossed to personally), more advantageous for the higher rate tax payer.

CGT/Tax on chargeable gain (ie disposal of the asset)

Unfortunatley companies do not have annual tax free exemptions, as individuals enjoy on any net asset gain (currently £10,900 per beneficial owner) - but then again Co's may apply indexation to any chargeable gain, which individuals can't.

Reliefs,

Apart from indexation and as a company (not withstanding any qualiying Business Asset Roll Over Relief) , there are no other personal reliefs such as for example primary residence relief (gain exemption applicable to any period the property acted as your primary residence during ownership pre-disposal) - that may be applied

BIK

If the properties are rented to yourself, other directors employees, family, for less than maket value, than BIK taxation may come into play if held under a ltd co.

Legal Ownership

The properties will belong to the Ltd Co not you, so they are an asset that any creditors may make a claim to, and/or if you wish to disolve the business (and want to retain the units), you will have to pch the properties from the company - which in both cases if you can't obtain the finance/have the capital to address, may result in their disposal/loss, plus of course accompanying costs/taxes etc.

In conclusion, holding property within a Ltd Co can be advantageous, but IMHO is really best placed for large portfolio prof landlords.

But I'm sure your pal has already gone over all the above (and more) with you ??

Hope this helps

Holly x