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Buying Property Through Limited Company

 
 
PhilP
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      09-24-2003, 08:36 AM
I'm thinking of buying a house throught a limited company as a
long-term investment (probably to supplement my pension when I retire
in 20 or so years!). As far as I can tell the advantages and
disadvantages are as follows:

Advantages

1. Only pay corporation tax which is less than personal tax
2. It separates the 'business' from my personal finances
3. If more properties are purchased and income increases then a
corporate structure would look more professional and make the finances
easier to manage.



Disadvantages

1. Administration Burden - filing accounts etc.
2. No capital gains allowances when coming to sell the property
3. Getting money from the property when selling will be complicated
(but this is not the intention!)
4. Interest rates not quite so favourable


Has anybody got any other thoughts? Also Can the company register for
VAT and get this back on business expenses? I know VAT is not charged
on rent.

Cheers,

Phil
 
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Ronald Raygun
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      09-24-2003, 09:26 AM
PhilP wrote:

> I'm thinking of buying a house throught a limited company as a
> long-term investment (probably to supplement my pension when I retire
> in 20 or so years!). As far as I can tell the advantages and
> disadvantages are as follows:
>
> Advantages
>
> 1. Only pay corporation tax which is less than personal tax


This is often true, but not in all circumstances.
It is also really the only advantage.

> 2. It separates the 'business' from my personal finances


Bogus. You can run a separate business without it having to be
a company.

> 3. If more properties are purchased and income increases then a
> corporate structure would look more professional


To whom? And what would the advantage of that be?

> and make the finances easier to manage.


No.

> Disadvantages
>
> 1. Administration Burden - filing accounts etc.


Correct.

> 2. No capital gains allowances when coming to sell the property


You don't get those for investment property anyway, company or no,
unless you use it as your home.

> 3. Getting money from the property when selling will be complicated


How so?

> (but this is not the intention!)


Fair enough.

> 4. Interest rates not quite so favourable


There are probably ways around this, such as owning the properties
personally on paper but vesting beneficial ownership in the company.

> Has anybody got any other thoughts? Also Can the company register for
> VAT and get this back on business expenses? I know VAT is not charged
> on rent.


I gather you cannot register for VAT unless you make VAT-chargeable
supplies.

 
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David Floyd
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      09-24-2003, 09:37 AM
In message of Wed, 24 Sep 2003, Ronald Raygun writes
>PhilP wrote:
>
>
>> Disadvantages
>>
>> 1. Administration Burden - filing accounts etc.

>
>Correct.
>

Hardly a burden though.

>> 2. No capital gains allowances when coming to sell the property

>
>You don't get those for investment property anyway, company or no,
>unless you use it as your home.
>


How do you figure that out. When not a company you still get £7700 Cap
Gain at 0%, investment property or not.

DF
 
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Ronald Raygun
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      09-24-2003, 10:13 AM
David Floyd wrote:

> In message of Wed, 24 Sep 2003, Ronald Raygun writes
>>PhilP wrote:
>>>
>>> 2. No capital gains allowances when coming to sell the property

>>
>>You don't get those for investment property anyway, company or no,
>>unless you use it as your home.

>
> How do you figure that out. When not a company you still get £7700 Cap
> Gain at 0%, investment property or not.


Oops. Sorry, I thought he meant PRR, my mistake.


 
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Richard Faulkner
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      09-24-2003, 10:25 AM
In article <(E-Mail Removed) >, PhilP
<(E-Mail Removed)> writes
>I'm thinking of buying a house throught a limited company as a
>long-term investment (probably to supplement my pension when I retire
>in 20 or so years!). As far as I can tell the advantages and
>disadvantages are as follows:
>
>Advantages
>
>1. Only pay corporation tax which is less than personal tax
>2. It separates the 'business' from my personal finances
>3. If more properties are purchased and income increases then a
>corporate structure would look more professional and make the finances
>easier to manage.
>
>
>
>Disadvantages
>
>1. Administration Burden - filing accounts etc.
>2. No capital gains allowances when coming to sell the property
>3. Getting money from the property when selling will be complicated
>(but this is not the intention!)
>4. Interest rates not quite so favourable
>
>
>Has anybody got any other thoughts? Also Can the company register for
>VAT and get this back on business expenses? I know VAT is not charged
>on rent.
>
>Cheers,
>
>Phil


I own several properties with the same plan as yourself. I had a meeting
with my accountant about 12 months ago and, whilst I cant remember the
specific reasons, the cons outweighed the pros, and I have not done it.

I think the main factors were admin and lack of flexibility did not make
it worth the savings.


--
Richard Faulkner
 
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Richard Faulkner
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      09-24-2003, 10:26 AM
In article <prdcb.3845$(E-Mail Removed)>, Ronald
Raygun <(E-Mail Removed)> writes
>> 2. No capital gains allowances when coming to sell the property

>
>You don't get those for investment property anyway, company or no,
>unless you use it as your home.


Yes you do, but only the personal allowance.


--
Richard Faulkner
 
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Jonathan Bryce
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      09-24-2003, 05:14 PM
PhilP wrote:

> 1. Only pay corporation tax which is less than personal tax


Not for a close investment company
 
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Ronald Raygun
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      09-25-2003, 10:19 AM
Richard Faulkner wrote:

> In article <prdcb.3845$(E-Mail Removed)>, Ronald
> Raygun <(E-Mail Removed)> writes
>>> 2. No capital gains allowances when coming to sell the property

>>
>>You don't get those for investment property anyway, company or no,
>>unless you use it as your home.

>
> Yes you do, but only the personal allowance.


OK, but companies don't pay CGT as such, do they? To them, a capital
gain realised would be taxed as ordinary profit, wouldn't it? So, for
a modest-sized company, the gains tax rate ceiling would be 19%
(marginally 23.75%).

The owner, if in danger of becoming a HRTP if the whole loot were
paid out as dividends in one year, could leave part of the money in
the company and spread the dividend over several tax years to
escape the extra 25% dividend tax.

 
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john boyle
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      09-25-2003, 08:05 PM
In message <Sizcb.200$(E-Mail Removed)>, Ronald
Raygun <(E-Mail Removed)> writes
>Richard Faulkner wrote:
>
>> In article <prdcb.3845$(E-Mail Removed)>, Ronald
>> Raygun <(E-Mail Removed)> writes
>>>> 2. No capital gains allowances when coming to sell the property
>>>
>>>You don't get those for investment property anyway, company or no,
>>>unless you use it as your home.

>>
>> Yes you do, but only the personal allowance.

>
>OK, but companies don't pay CGT as such, do they? To them, a capital
>gain realised would be taxed as ordinary profit, wouldn't it? So, for
>a modest-sized company, the gains tax rate ceiling would be 19%
>(marginally 23.75%).
>
>The owner, if in danger of becoming a HRTP if the whole loot were
>paid out as dividends in one year, could leave part of the money in
>the company and spread the dividend over several tax years to
>escape the extra 25% dividend tax.
>

The snag with owning investment property in a LtdCo (as opposed to a
commercial property used in the course of a business) is that not only
will the LtdCo pay Corp Tax on the profit on sale but if you then sell
the shares or wind the company up you have to pay personal CGT = double
taxation.
--
john boyle
 
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David Floyd
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      09-25-2003, 09:46 PM
In message of Thu, 25 Sep 2003, john boyle writes
>In message <Sizcb.200$(E-Mail Removed)>, Ronald
>Raygun <(E-Mail Removed)> writes
>>Richard Faulkner wrote:
>>
>>> In article <prdcb.3845$(E-Mail Removed)>, Ronald
>>> Raygun <(E-Mail Removed)> writes
>>>>> 2. No capital gains allowances when coming to sell the property
>>>>
>>>>You don't get those for investment property anyway, company or no,
>>>>unless you use it as your home.
>>>
>>> Yes you do, but only the personal allowance.

>>
>>OK, but companies don't pay CGT as such, do they? To them, a capital
>>gain realised would be taxed as ordinary profit, wouldn't it? So, for
>>a modest-sized company, the gains tax rate ceiling would be 19%
>>(marginally 23.75%).
>>
>>The owner, if in danger of becoming a HRTP if the whole loot were
>>paid out as dividends in one year, could leave part of the money in
>>the company and spread the dividend over several tax years to
>>escape the extra 25% dividend tax.
>>

>The snag with owning investment property in a LtdCo (as opposed to a
>commercial property used in the course of a business) is that not only
>will the LtdCo pay Corp Tax on the profit on sale but if you then sell
>the shares or wind the company up you have to pay personal CGT = double
>taxation.


Not really, because you pay dividends out until the Revenue Reserves are
all paid out as such. Then the shares are worth next to nothing if there
are no assets left.

DF
 
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