Using my limited company to buy land to turn into my main home

koalakoala

But they haven't got personal funds !

silvercar

koalakoala said:

But they haven't got personal funds !

If the funds are in a limited company that they are shareholders of, then they can take any mixture of director’s loans, dividends or PAYE.

Grumpy_chap

silvercar said:

If the funds are in a limited company that they are shareholders of, then they can take any mixture of director’s loans, dividends or PAYE.

Director's Loans may give rise to a BIK liability.  Followed by repayment back to the company at some future date and then needing drawing again as Dividend or PAYE.

Dividends and PAYE will give rise to an immediate IT / NI liability.

The key here would be professional Accountant advice to time the drawings to make the best use of available tax allowances / rates.  Director Loans may assist in that timing while also releasing the funds sooner to fund the land purchase and house build.

GDB2222

silvercar said:

koalakoala said:

But they haven't got personal funds !

If the funds are in a limited company that they are shareholders of, then they can take any mixture of director’s loans, dividends or PAYE.

The OP is unwilling to take dividends because she doesn’t want to pay higher rate tax. The same applies to PAYE. Not sure about loans. 

Grumpy_chap

GDB2222 said:

The OP is unwilling to take dividends because she doesn’t want to pay higher rate tax. The same applies to PAYE. Not sure about loans. 

At some point, the OP has to draw the funds and pay the resulting taxes that arise.  Incurring tax now my result in lower tax liability overall.

While no figures have been given, let's consider the following scenario with made up sample figures for discussion purposes:
 - Buy the land, say £100k
 - Build the house, say £100k.
 - Draw funds now (and next tax year) so that is £200k that needs to be drawn plus whatever taxes arise.
 - Pay for the land and house build from personal funds (after taxation).

Alternative scenario:
 - Company buys the land, £100k
 - Company builds the house, £100k
 - Company owns the house, £400k value
 - Company sells the house to the OP for £400k (assume OP has the £400k or realises from sale of current house).
 - At some future point, there is £400k to be drawn from the business which will incur whatever tax liabilities arise at that future time.

The long term seems to be that drawing the funds now might well result in lower overall tax liabilities.  Director's Loan (which will result in BIK liabilities) may be a way to stage the drawings so avoid the worst tax thresholds.

All more complex than an internet forum can resolve and professional advice would seem to be required.