Buy property via limited company


R

Rody

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?

Cheers,
Rody
 
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T

Terry Harper

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?
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
mortgages.

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.
 
T

tim.....

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

tim
 
R

Rody

If the articles of association of the company allows the ownership of
residential properties for letting purposes, yes, you could.
You mean the Memo here right? I guess this normally just says
something like "To conduct any lawful business activity" for most.

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


Rody
 
R

Rody

It will make no difference to item this whatsoever.
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?

Cheers,
Rody
 
T

tim.....

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

tim
 
N

Neil Pike

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

Jonathan Bryce

Rody said:
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?
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.

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

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