I have 100k+ in a limited company that I use for my contracting work. As we all know money in business accounts earns virtually no interest.
I want to invest the money in a property based on the following assumptions:-
- I need to lend some money to the company to purchase the property in full. I will lend to the company
at a commercial rate. I realise I will need to pay tax on this interest.
- I don't want a commercial mortgage as I don't want any risk.
- I will hold the property long term for rental income not capital investment
- I will continue to contract through the limited company for at least the next 10 years
- I already have personal property investments. This is purely a way of using up the money that is in my company account.
- I believe that I can make almost 6% from rental investments after expenses. I'm currently getting less than 1% on sums above 100k and even deposit accounts are miserable.
I guess the best way would be for my company (C1) to create and own a new LTD company (C2) as I've been told by my accountant that the property purchase would turn C1 into a Close Investment Company? C1 would transfer the money to C2 profits from C2 would be paid to C1. With the extra money in C1 this could be used to fund a pension.
I think C2 is needed as I don't want to get rental income taxed from the flat rate VAT scheme as well as corporation tax. Also changing the nature of C1 from a service company would mean that I couldn't claim expenses as a contractor according to my accountant.
My accountant basically doesn't want to know and thinks I should extract the money from the company (at 40%!!) and buy it personally but that defeats the purpose of leaving the money in there in the first place. I don't want to be a higher rate payer if I can avoid it.
Anyone have any advice for my personal circumstance? There are a lot of forum posts about property but not from people who already have property investments personally and large sums in a company account.
Any help appreciated!