Buying parent's house through my LTD company

username901

Ok, had a chat to mum today. The reason for the equity is now mainly back to pay a loan they had for a motorhome from 10 years ago which was interest only. The motorhome was sold a year or so ago to help pay to make the house a bit more accessible and some DIY. She's unsure of the amount but I would estimate around £30k.

So given buying the house through a BTL mortgage is unfeasible, and while I could take a director's loan between wife and I, I've not long repaid them (£9500 each) since forming. Accounts showing around £25k profit, and if wife and I draw salary only will go up about £7-8k a month, could buying a share of the property (say 15% through company) be an option rather than myself purchasing. If the amount was £30k I take it there would be no stamp duty?

xylophone

Are there any (for rent) Housing Association/Charitable Foundation properties for the elderly frail available near you?

If so, perhaps your parents could rent and be comfortable as your father's health declines.

You might then be responsible for selling their property - any loans and debts could be met and the balance invested to provide your parents with a return on their capital?

[Deleted User]

How about a straightforward 2nd residential mortgage as home for dependant relative? Plenty of mainstream lenders do these at 20% or less deposit.
Maybe you could do it as a gifted deposit from equity somehow as well so you don't have to actually any funds down (although most I can think of require the parent to leave the property for that to work)

This owuod stick the property in your name which would need to be squared off

Is there a particular reason you are focusing on Ltd company BTL?

username901

Thanks for the suggestion. I'm not sure tbh, will have to look.

One thing I forgot to mention is the loan needs to be paid back at the end of this year (she didn't specify a date), so really 2-3 months to come up with a cheaper alternative for them.
At the moment they're mortgage free so not sure how paying rent elsewhere would benefit them, their house is adapted for my dad already, eg stairlift, oxygen all round the house, and they live in a very nice area (I may have under estimated the house value by about 50% after looking at prices just now), moving near me would mean new GP, different hospitals so might not be the best thing for him


AFAIK they have no other debts other than for the old motorhome, they were 'old school' in that they never borrowed.

00ec25

username901 wrote: »

So given buying the house through a BTL mortgage is unfeasible, and while I could take a director's loan between wife and I, I've not long repaid them (£9500 each) since forming. Accounts showing around £25k profit, and if wife and I draw salary only will go up about £7-8k a month, could buying a share of the property (say 15% through company) be an option rather than myself purchasing.

as there is no mortgage on the parents property it would be possible for your company to buy a share in that property. Obviously you will have to ensure the company's articles give it the power to do so - you are already aware of SPV. They exist for a reason, to separate the property asset from the existing business's possible failure or debts ...

as the property is worth <£500k the company will not be exposed to ATED ... unless the threshold reduces (or your value + 50% is still too low?)

when the property is sold the company will pay corporation tax (currently 19%) on its profits. That compares reasonably well with you owning the property directly and thus being subject to CGT at 18% and/ or 28% except that you personally would have a CGT allowance. The company won't. Number crunching required to see what is best. But then again sale is likely in what 1 -2 years ? So tax on a gain will not be much and should not cloud the fact your primary objective is to help your parents, not make money for yourself?

username901 wrote: »

If the amount was £30k I take it there would be no stamp duty?

higher rate SDLT applies to any purchase by a non natural person - your company would pay +3% on each band so:
£0 - 125k = 0% +3% = 3% payable
125k - 250k = 2% + 3% = 5% payable

username901

Deleted_User wrote: »

How about a straightforward 2nd residential mortgage as home for dependant relative? Plenty of mainstream lenders do these at 20% or less deposit.
Maybe you could do it as a gifted deposit from equity somehow as well so you don't have to actually any funds down (although most I can think of require the parent to leave the property for that to work)

This owuod stick the property in your name which would need to be squared off

Is there a particular reason you are focusing on Ltd company BTL?

Only considered BTL as I personally don't have the money, and until April on £1k a month income, the savings in cash I do have will be used in Jan to pay a £18k tax bill. My consultancy business brings in £10k +vat a month so my first thought was a mortgage to help them out.

As above I'm now considering buying a share of the property for £30k or so through company, no lending required. I just want to get them money quickly and as cheaply for both of us.

username901

00ec25 wrote: »

as there is no mortgage on the parents property it would be possible for your company to buy a share in that property. Obviously you will have to ensure the company's articles give it the power to do so - you are already aware of SPV. They exist for a reason, to separate the property asset from the existing business's possible failure or debts ...

as the property is worth <£500k the company will not be exposed to ATED ... unless the threshold reduces (or your value + 50% is still too low?)

higher rate SDLT applies to any purchase by a non natural person - your company would pay +3% on each band so:
£0 - 125k = 0% +3% = 3% payable
125k - 250k = 2% + 3% = 5% payable

Thank you for that. The 3% charge not a problem.

I'll speak to my accountant if he's back next week and run it past him, I just like to make it appear I know what I'm talking about before I speak to him! Will also need to run it past my wife, the MD

How long would something like this take to happen? I presume we all sit down with a solicitor and draw something up?

I also imagine to keep HMRC happy I'll need to show some.sort of rental income?

00ec25

username901 wrote: »

I also imagine to keep HMRC happy I'll need to show some.sort of rental income?

why?

the company is making an investment in property for capital gain, not rental income

the company reasonably expects to realise that gain within 2 - 3 years when a death occurs and the asset can be sold

username901

The part im most clueless about is when it's time to sell the property how is that handled? Is the property listed at full price and then explained to buyers that there are two 'shares' they need to purchase? Or is the property purchased from my parents who in turn would settle the 10% share (or whatever it is) after completion? Would it be simplest for mum to purchase the share back from my company prior to listing (most likely funded by myself at that point) when the time comes?

Sorry for all the (potentially dumb) questions

xylophone

At the moment they're mortgage free so not sure how paying rent elsewhere would benefit them,

If they moved into an adapted rented property near you (I am assuming that since your father suggested that your mother should move near you, your own area is not too dusty), then it would be suitable for your father and also for mother after his death.

It would entirely relieve your mother of the worry of house maintenance etc and, of course, you would be on hand to help your mother through the last stages of your father's illness and the early months of widowhood.


You yourself might assist with the rent initially until their (apparently very desirable home) sold - after the payment of their debt they would have substantial capital which could be invested for your mother's future.

However, if such a move would be too distressing for your father, then clearly this idea is a non starter.

Are you in a position to obtain a personal loan for £30,000 (or even borrow against your own property)?

It would then be a simple loan to your parents repayable when your mother sells the property after your father's death?