Buy property via limited company

Discussion in 'UK Finance' started by Rody, Aug 1, 2007.

  1. Rody

    Rody Guest

    Hi all,

    Just pondering something on the way back from work today. If someone
    were working as a contractor via a limited company and wanting to
    purchase some investment properties, could he do so via his existing
    limited company and thus use his pre-tax earnings to do so?

    I guess you would be paying commercial rates on the mortgages, but
    would these be higher than regular BTL mortgages?

    Also, would doing this make it easier to avoid being caught by IR35
    for his "main" job, since he would now be doing more than one job?

    Rody, Aug 1, 2007
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  2. Rody

    Terry Harper Guest

    If the articles of association of the company allows the ownership of
    residential properties for letting purposes, yes, you could.

    BtL mortgages are usually at higher rates and lower LTV than normal

    AFIAA IR35 applies to work that you do under certain circumstances.
    You can be both within IR35 and outside it simultaneously if you do
    more than one job. For example, contracting to a firm as a
    quasi-employee, and manufacturing equipment for sale.
    Terry Harper, Aug 1, 2007
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  3. Rody

    tim..... Guest

    He could, but the usual analysis is that the extra costs
    associated with doing this outweight the benefits.
    It will make no difference to item this whatsoever.

    tim....., Aug 2, 2007
  4. Rody

    Rody Guest

    You mean the Memo here right? I guess this normally just says
    something like "To conduct any lawful business activity" for most.

    Hmm I see, and I guess you'd split your income up into IR35 and non-
    IR35 and pay tax accordingly.

    Rody, Aug 2, 2007
  5. Rody

    Rody Guest

    So for example:

    Contracting income: 100,000
    Gross salary paid (18,000)
    Employers NI (2,000) (say)
    Cost of house (70,000)
    Fees + interest (10,000)

    Would that 70,000 be taxed as income?

    Rody, Aug 2, 2007
  6. Rody

    tim..... Guest

    Of course it will be. The capital purchase of a property
    is not a valid tax deduction.

    tim....., Aug 2, 2007
  7. Rody

    Neil Pike Guest

    Yes, that is fine. Note that if you then live in one of these properties then
    you either have to pay benefit-in-kind or a commercial rent. I lived in a flat
    my company owned for a short period and paid a commercial rent for the period -
    the same rent I subsequently got from external tenants.
    Yes, slightly higher - at least they were when I did it a few years back (not
    doing it at the moment). It's down to how good a deal you can cut with your
    bank or mortgage provider.
    No, it would have no effect. It would be seen as an investment by the tax-man
    rather than a job per se - no different to you investing company funds in
    stocks and shares - which is something else you can do with pre-tax company
    money of course.

    In any event, each contract would be looked at by the IR separately for IR35
    purposes. Having more than one contract concurrently doesn't in and of itself
    make you not liable for IR35 - but if you are working for multiple clients
    simultaneously then by the nature of doing that it's then more likely that the
    way you are actually providing those services is going to be outside IR35.
    Unfortunately there are no hard and fast rules..

    Neil Pike
    Protech Computing Ltd
    Neil Pike, Aug 2, 2007
  8. Yes, you can, but you need to look at the tax position very carefully. When
    you come to sell the property, the company could well pay tax on capital
    gains on it. Then the shareholder would pay tax again either on dividends
    or capital gains on liquidation of the shares.

    It will depend on the bank. Certainly, most lenders will require a personal
    guarantee, and some, particularly the big banks, won't charge any extra on
    the interest.
    No. The rental income is always calculated separately for tax, and it won't
    affect the IR35 position.

    What it could do though, is make it an investment company, and therefore
    liable to the full 30% rate of corporation tax, and the shares not eligible
    for business property relief.
    Jonathan Bryce, Aug 2, 2007
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