Setting up a company to property develop?

Robson1978

Hi - myself and a friend are considering buying a property to refurbish and sell on, hopefully at a profit. I am trying to look into whether or not we should set up a company to do this in order to try to reduce our tax liability should we be profitable. The intial aim is that 100% of profits would be resinvested to buy a bigger property and do the same thing again.

Any thoughts/advice much appreciated :-)
Regards
Robson

theartfullodger

Robson1978 wrote: »

..

Any thoughts/advice much appreciated :-)
Regards
Robson

'tis the decent British thing to pay full tax normally due & not spend time & effort tax-avoiding:

Cheers!

00ec25

as there are 2 of you then a company is probably a good idea since it will set in stone who is entitled to what and offers some tax benefits for trading

the company will pay 20% corporation tax on its profits. If you therefore mange to recycle the cash back into new opportunities within the company's trading year it should be possible to keep the profit very low.

obviously you and friend will need to decide the shareholding between you and what class of shares to have

when/if you decide to withdraw the profits then if you are a basic rate taxpayer and take via dividends you will not have any tax to pay , if a higher rate taxpayer you will have to pay 25% of the dividend paid to you as tax

if you decide to pay yourself a salary from the company then you would incur additional admin costs which may not make it worthwhile - rather depends on whether you have another source of income besides this

main downside is the company does not get the tax allowances you get as individuals but if you already have a regular job then those allowances are being used in that anyway

I_have_spoken

If you have partners who don't work at the moment, they can be employed by the company to do book-keeping/PA work which means profits can come out without paying tax. It's what all the MPs do.

Robson1978

Thanks all. Both of us and our wives are in employment although my potential partner already has his own building/engineering. It feels like a company might be the best although also most complex option.

Thanks
Robson

Robson1978

Artfullodger - I am merely looking at options to minimise my tax liability so that I can put more aside to top up my pension pot for the future. I have no qualms at all about this and would never advocate avoiding tax which is very different from what I am looking to do.

Thanks :-)
Robson

theartfullodger

Robson1978 wrote: »

.... I have no qualms at all about this and would never advocate avoiding tax which is very different from what I am looking to do.

...

As you are not advocating avoiding tax should we take it you are advocating evading tax which AFAIK is unlawful...???
http://www.hmrc.gov.uk/tax-evasion/hotline.htm
&
https://www.gov.uk/government/policies/reducing-tax-evasion-and-avoidance

Tax avoidance is bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. It involves operating within the letter – but not the spirit – of the law. Tax evasion is when people or businesses deliberately do not pay the taxes that they owe and it is illegal.

In all affairs, particularly property & tax, attention to detail is recommended...

If of course you do not plan either tax avoidance or tax evasion, great!

Cheers!

Robson1978

Certainly not on both counts! I do however make significant tax payments each year via my day job and see no problem with looking to construct this possible venture in as efficient a manner as possible whilst remaining within both legal and moral boundaries.

Regards
Robson