Buying a Property through a Ltd Company

Birmingham234LL

We are thinking of buying a property outright through the profits of our Ltd company. Are there any reasons not to do this? The plan is to rent the property out for a few years and then maybe sell our main family home & move into the new property owned by the company. Would there be any reason we could not do this, especially if we were by then retired but remained as shareholders in the company?

BoGoF

What are the reasons that you do want to do this? Maybe then people can address what you see as the benefits?

user1977

Not sure it makes sense tax-wise for your principal residence to be owned by a limited company, if you mean that's your eventual aim?

SDLT_Geek

Birmingham234LL said:

We are thinking of buying a property outright through the profits of our Ltd company. Are there any reasons not to do this? The plan is to rent the property out for a few years and then maybe sell our main family home & move into the new property owned by the company. Would there be any reason we could not do this, especially if we were by then retired but remained as shareholders in the company?

It would be disastrous for stamp duty land tax if the property is in England and you are buying it for over £500K.

silvercar

We've done it with no intention of moving in. Obvious tax advantages in doing so. If you need a mortgage be prepared to pay a slight premium (+0.25% ish) and to give a personal guarantee.

BoGoF said:

What are the reasons that you do want to do this? Maybe then people can address what you see as the benefits?

Means you don't have to pay income or capital gains tax on getting the money out of the company to purchase in your own name.

Transfer to your own name will come at a cost, so I would say that muddies the waters.

DE_612183

also am I right in saying that if the company owned the property - if you wanted to sell in the future you'd be subject to capital gains tax?

DullGreyGuy

DE_612183 said:

also am I right in saying that if the company owned the property - if you wanted to sell in the future you'd be subject to capital gains tax?

They company would be yes.

Likewise unless you are paying the company rent at a market rate then that is a benefit in kind and you'll have to pay tax on that benefit. 

silvercar

DE_612183 said:

also am I right in saying that if the company owned the property - if you wanted to sell in the future you'd be subject to capital gains tax?

The company would be subject to CGT on "selling" it to the individuals. Of course, they don't actually have to sell it.

SDLT_Geek

DE_612183 said:

also am I right in saying that if the company owned the property - if you wanted to sell in the future you'd be subject to capital gains tax?

There would be corporation tax within the company on the gain realised.  Then if money is taken out of the company, there could be tax on that extraction.

The company would pay the extra 3% SDLT (assuming the property is in England) on the purchase even if it is the only property the company owns.  Much, much worse if the price is over £500K.

theartfullodger

I would hope (general point, nothing personal) that any current advantages (tax avoidance presumably) available to do this via companies will be closed tightened up over the shortly coming years.

And is likely to happen.. The country needs the income! So any cunning plan may well fail anyway.

Keep_pedalling

Another potential downside, If you have children, and die with your home in the company name your IHT exemptions would fall from £1M to £650k as your estates would not be able to claim the residential NRB.