Buying residential property under Limited Company

[lithium147]

Correct, almost. The time limit for repayment is 9 months and 1 day after end of financial year the loan is drawn in, otherwise the 25% is due.

The 25% is refunded - normally by offset to Corporation Tax otherwise due - 9 months and 1 day after the end of the financial year of repayment.

Thx Jessica.
I just want to make this completely clear. Is this right? :

• if you pay back within the account period, then you dont pay the 25%
• if you pay back within 9 months after the account period, then you pay 25%, and then reclaim this back in a future CT return
• if you pay back after the 9 months, then you pay 25%, but cant reclaim this back

And how about the £15,000 limit? So what happens if the loan is more than £15,000?

[Jessica@WhiteFieldTax]

Thx Jessica.
I just want to make this completely clear. Is this right? :

• if you pay back within the account period, then you dont pay the 25%
• if you pay back within 9 months after the account period, then you pay 25%, and then reclaim this back in a future CT return
• if you pay back after the 9 months, then you pay 25%, but cant reclaim this back

And how about the £15,000 limit? So what happens if the loan is more than £15,000?

Almost...

• if you pay back within the account period, then you dont pay the 25%
• if you pay back within 9 months after the account period, then you dont pay the 25%
• if you pay back after the 9 months, then you pay 25%, and then reclaim this back in a future CT return after loan is repaid

I'm not aware of any £15,000 limit. If you can give me a URL where you saw this, I'll look.

Loans over £10k need to be shareholder approved - only a issue if you have other shareholders.

HTH

[lithium147]

I'm not aware of any £15,000 limit. If you can give me a URL where you saw this, I'll look.

CTM61540 - Close companies: loans to participators: exclusion of certain loans
it is linked to from here (under What is not a director's loan for Corporation Tax purposes):
HM Revenue & Customs: Directors' loan accounts and Corporation Tax explained

[Clare@InTouch]

CTM61540 - Close companies: loans to participators: exclusion of certain loans
it is linked to from here (under What is not a director's loan for Corporation Tax purposes):
HM Revenue & Customs: Directors' loan accounts and Corporation Tax explained

One of the restrictions there though is that you must not hold a material interest in the company, being more than 5% of the shares.

[lithium147]

One of the restrictions there though is that you must not hold a material interest in the company, being more than 5% of the shares.

Yeah, but then it says this:

Where both husband and wife are directors or employees, they will each be entitled to a separate limit of £15,000.

Seems unlikely that a director would not have 5% shares. Perhaps they are thinking about a big company.

I dont get the point of this guidance. The title is this: exclusion of certain loans
So is it describing loans that are not directors loans, therefore, not applicable for the 25% CT?

[Jessica@WhiteFieldTax]

I see what you were referring to now:

Yeah, but then it says this:

Seems unlikely that a director would not have 5% shares. Perhaps they are thinking about a big company.

I dont get the point of this guidance. The title is this: exclusion of certain loans
So is it describing loans that are not directors loans, therefore, not applicable for the 25% CT?

Correct - its to cover loans to shareholding employees within larger businesses.

[leemof]

I have a scenario:
I wish to sell my house but cannot (house market/ asking too much for it), I’m therefore thinking about renting it out but I’m told that any income from the renting out needs to be put on yourself assessment and thus pushes you into the higher tax bracket.
In addition I have an amount in my business bank account, as I take only up to the higher tax threshold each year, that enables me to purchase the house outright (roughly 150k).
With that, I’m thinking about selling my house to my business in full and renting the house out via the business. I have several concerns about this:
• Can I use the same business as my consultancy business?
• Are there any limitations or a persona using his own business?
• In the future, I’m talking retirement time, when I come to sell the house (via the business), the cash would then hold the sum of the monies gained from the sale, I could essentially draw down the amount and close the business (what are the tax implications) Or I could just carry on drawing a wage until the amount has gone?
Cheers

[northernladuk]

I have a scenario:
I wish to sell my house but cannot (house market/ asking too much for it), I’m therefore thinking about renting it out but I’m told that any income from the renting out needs to be put on yourself assessment and thus pushes you into the higher tax bracket.
In addition I have an amount in my business bank account, as I take only up to the higher tax threshold each year, that enables me to purchase the house outright (roughly 150k).
With that, I’m thinking about selling my house to my business in full and renting the house out via the business. I have several concerns about this:
• Can I use the same business as my consultancy business?
• Are there any limitations or a persona using his own business?
• In the future, I’m talking retirement time, when I come to sell the house (via the business), the cash would then hold the sum of the monies gained from the sale, I could essentially draw down the amount and close the business (what are the tax implications) Or I could just carry on drawing a wage until the amount has gone?
Cheers

Have you not read this thread? or tried a search as it suggests?

Why would you consider doing something that isn't beneficial just to avoid paying tax on a few K?

[pcgtron]

I have a scenario:
I wish to sell my house but cannot (house market/ asking too much for it), I’m therefore thinking about renting it out but I’m told that any income from the renting out needs to be put on yourself assessment and thus pushes you into the higher tax bracket.
In addition I have an amount in my business bank account, as I take only up to the higher tax threshold each year, that enables me to purchase the house outright (roughly 150k).
With that, I’m thinking about selling my house to my business in full and renting the house out via the business. I have several concerns about this:
• Can I use the same business as my consultancy business?
• Are there any limitations or a persona using his own business?
• In the future, I’m talking retirement time, when I come to sell the house (via the business), the cash would then hold the sum of the monies gained from the sale, I could essentially draw down the amount and close the business (what are the tax implications) Or I could just carry on drawing a wage until the amount has gone?
Cheers

I rent my flat out in London and whilst it may put you into the top tax bracket the actual tax you will pay on this can be very little
For starters, management fees, insurance, mortgage interest, repairs are all tax deductible along with other things.

EG: £1000 per month rent is £12000 a year
depending on your interest rate I would imagine at least half of that figure if not more is mortgage interest which is deductable
£6000 a year then
£300 insurance
If you are paying a management fee then this is tax deductable lets say 10% of rent £1200 a year
Repairs, lets say £500 a year which is probably on the low side

So £4000 to pay tax on even at 40% is £1600 tax on the guessed figures here

Keep it personal

[northernladuk]

I rent my flat out in London and whilst it may put you into the top tax bracket the actual tax you will pay on this can be very little
For starters, management fees, insurance, mortgage interest, repairs are all tax deductible along with other things.

EG: £1000 per month rent is £12000 a year
depending on your interest rate I would imagine at least half of that figure if not more is mortgage interest which is deductable
£6000 a year then
£300 insurance
If you are paying a management fee then this is tax deductable lets say 10% of rent £1200 a year
Repairs, lets say £500 a year which is probably on the low side

So £4000 to pay tax on even at 40% is £1600 tax on the guessed figures here

Keep it personal

And mileage every month to drive down and inspect it...