Incorporating a buy-to-let

anselld

Salemicus wrote: »

Ah, didn't know that. So instead I set up the company with my brother, with class A of shares owned by me, class B owned by my wife, class C (with no voting rights) owned by him. The company has no assets yet, so shares worthless. He creates a bare trust for my kids and puts the class C shares in it. Then I start running the company, and can pay up to (Personal Allowance + Dividend Allowance) * num_kids in dividends to class C shareholders per year.

Distinction between Class A and Class B is for future-proofing in case of e.g. differential incomes.

Does that work?

I think HMRC frown on alphabet share classes if it is purely for the purpose of tax avoidance. (Though I don't know what they can do about it).

SouthLondonUser

If the property is in your name, then the mortgage can only be in your name, not in the company's. This means that the company cannot have a secured loan because the company has no security to offer. You also need tax and legal advice to be sure this structure would work - I cannot possibly comment.

If the property is in the company's name, then the company can get a mortgage, but, AFAIK, most lenders would still require some form of personal guarantee from the directors of the company. This is to ensure directors don't fraudulently collapse the company and tell lenders to **** off. Construction companies, for example, are notorious for going bankrupt frequently then being reborn under a different name. If you have sued company X, the directors have collapsed it and then created company Y, good luck getting your money back: it's not impossible, but it's uncertain, long, complex and expensive. This is the kind of scenario lenders want to protect themselves from.

If you want to give some of the proceeds to children or young adults, who would not have other income, then a company structure might be beneficial, because the alternative would be to give that money out of your post-tax income. However, again, you need to speak to tax and legal advisors to be sure the structure would work.