Ltd company for btl

coldstreamalways

I'm looking u do this to reduce tax on btl profit but am not getting a warm feeling from accountants... I visited one locally who quoted about £2k to do the accounts for a limited company and have.a "fixed fee" quote for £150.

This is quite a wide variation. How much should I be looking at paying an accountant and any tips to find one?

Many thanks

Pennywise

You just have to talk to them, get a feel for how well you get on, get quotes, etc. Start with 3, if none suit you, try another 3, etc.

No different to choosing any other service provider. I've just been choosing a decorator and landscape gardener for two big jobs. The prices quoted vary enormously, as did the "feel" I got from the people who came to quote, and their business set-ups - some were doing it themselves as one man bands, others were going to send a team of subbies. There is no "right" price, nor "right" way to have things done. You have to make your own decisions.

Also remember that literally anyone can call themselves an accountant - it's not a protected/regulated term. Unless you can get a recommendation, you'd be better looking for a qualified/regulated accountant for your own protection. Looking for "chartered" on the letterhead or website is a good start - there are a few "chartered" accountancy bodies, but they'll be run by properly qualified accountants and have PI insurance etc.

anselld

There are very limited circumstances where the limited Company route will reduce overall tax on BTL income and there are further tax hurdles if you want to incorporate properties that you already own.

I would be inclined to do your own research first and then if you can confirm your understanding that tax can be saved then look for an Accountant that understands how to do so rather than just offering the lowest price.

coldstreamalways

I have done a lot of reading and it seems that in the medium term (4yrs+) that I would benefit from doing it. The accountant I saw who quoted £2k seemed to agree with me.

Perhaps I'll see another one and compare them.

Anselld would you be prepared to elaborate on the specific limited circumstances?

Thank you for all replies.

anselld

I would suggest you read "Using a property Company to Save Tax" by Carl Bayley. (Although the recent tax changes have made things even more difficult and the latest edition covering these is not due until later this year)

In a nutshell it is beneficial if ...
(a) you are already a higher rate tax payer from other sources
(b) you are re-investing income to grow portfolio rather than trying to take it out as dividends.

If you are trying to take income as it is earned then you will pay Corporation tax on the profits then dividend tax, which usually amounts to more than the tax on individually owned property.

There are some other marginal benefits (e.g. mortgage relief and the tax free dividend allowance) but also the cost, admin and statutory requirements of running a Ltd.

£2000 seems too high. My accountant charges circa £700 pa. for all Ltd Co accounts and filing requirements.

chucknorris

coldstreamalways wrote: »

I have done a lot of reading and it seems that in the medium term (4yrs+) that I would benefit from doing it. The accountant I saw who quoted £2k seemed to agree with me.

Perhaps I'll see another one and compare them.

Anselld would you be prepared to elaborate on the specific limited circumstances?

Thank you for all replies.

We currently have about 4m invested in btl as sole traders, it was more, but we recently/currently sold about £1.5m worth of property. We couldn't see any advantage in switching to corporate status, but I would be interested to hear your reasoning (I'm always open to alternative plans).

kidmugsy

anselld wrote: »

£2000 seems too high. My accountant charges circa £700 pa. for all Ltd Co accounts and filing requirements.

Agreed: I know of an accountant charging £60 per month for that.

trailingspouse

We pay about £2,000 pa for accountancy services (limited company plus our personal taxation).

Do you really want a cheap accountant? If you think it costs a lot to hire a professional, try hiring an amateur...

Pennywise

trailingspouse wrote: »

We pay about £2,000 pa for accountancy services (limited company plus our personal taxation).

Do you really want a cheap accountant? If you think it costs a lot to hire a professional, try hiring an amateur...

Anyone can form a company or throw a set of accounts or a tax return together, make it look all fine and dandy and then disappear into the sunset with the money, never to be seen again. It could be years/decades later when you finalise realise that it wasn't set up properly or their are tax liabilities you didn't know about.

A true professional will set it up properly and make sure that you're aware of all the implications, good and bad, and not just the short term "feel good" whilst either not knowing or not telling you of the potential issues years later.

Think of building a house. A proper builder will probably spend the same, or more, time, on the foundations as they will on actually putting up the structure. But it looks the same from the ground up as some dodgy charlatan who throws it up with poor foundations for a cheaper price. It's only years later when the house subsides or falls down that you realise it was false economy to use the cheap builder!

Think of a decorator. A professional will probably spend as long doing the preparation, filling, sanding, etc to get a good job. A cheap odd job man may paper over the old paper. Both may look just as good at first, but the odd job man's job is more likely to start peeling sooner, makes it more difficult to strip the next time it needs decorating and may mean that some big problem such as damp or cracks etc wasn't noticed soon enough for cheap/easy repair!

It's often the bits you don't see that really matter

anselld

Pennywise wrote: »

Anyone can form a company or throw a set of accounts or a tax return together, make it look all fine and dandy and then disappear into the sunset with the money, never to be seen again. It could be years/decades later when you finalise realise that it wasn't set up properly or their are tax liabilities you didn't know about.

A true professional will set it up properly and make sure that you're aware of all the implications, good and bad, and not just the short term "feel good" whilst either not knowing or not telling you of the potential issues years later.

Think of building a house. A proper builder will probably spend the same, or more, time, on the foundations as they will on actually putting up the structure. But it looks the same from the ground up as some dodgy charlatan who throws it up with poor foundations for a cheaper price. It's only years later when the house subsides or falls down that you realise it was false economy to use the cheap builder!

Think of a decorator. A professional will probably spend as long doing the preparation, filling, sanding, etc to get a good job. A cheap odd job man may paper over the old paper. Both may look just as good at first, but the odd job man's job is more likely to start peeling sooner, makes it more difficult to strip the next time it needs decorating and may mean that some big problem such as damp or cracks etc wasn't noticed soon enough for cheap/easy repair!

It's often the bits you don't see that really matter

All true enough, but looking at the price does not tell you which is which, neither for accountants nor builders!

chrismac1

The recent changes to tax have made it much harder to give clear-cut advice on whether to own a property in a company name or personally:

Should you put property in a company or own it personally?
In favour of owning a company personally instead of in the business:

1. It protects the asset. So, if something goes wrong with the trade, you may lose the company but retain the property.

2. The availability of Entrepreneurs Relief and the availability of the CGT exemption on any subsequent sale of the property are likely to be more favourable than the company's position, which would just be the indexation allowance.

3. It enables you to get money out of the company without NI if rent is paid. This could, however, reduce the amount of Entrepreneurs Relief.

4. It can give more flexibility if, for example, yourwant to retain the ownership of the property but sell the trading business, this is easier if they are separate.

5. Avoids any legal costs of transferring the property (which would have to be done properly).

6. Avoids the potential of double tax on a subsequent sale - the company could have capital gains tax to pay on any sale and the owner could have further capital gains tax to pay to get the money out of the company.

7. It avoids any benefits in kind issue that may arise if you are living in premises owned by the company.

8. Any capital gain in the company is at the corporation tax rate with no tax-free band.

However, there are some potential advantages of company ownership:

1. The corporation tax rate is 19% and falling to 17% which is much lower than the higher income tax rates.

2. Higher rate taxpayers will be unable to claim any interest on rental profits by 2021 but companies can.

3. For a business with multiple properties, the lower rate of CGT compared to a higher rate taxpayer can outweigh the loss of the exempt band.

4. The extra 3% stamp duty charge from 6 April 2016 only applies to a second property bought in someone's personal name, not a company-owned property.