Implications of new Ltd co having shares in Contracting Ltd co

[DesDixon]

Looking to set-up a new property SPV Ltd. Yes it has been discussed on here and I have looked at various posts.

My specific query is if I have the property co as a shareholder of my contracting co -

1 - what implications does this have for MVL (and ER) in the future?
2 - what implications are there if adding additional shareholders to the property SPV in the future?

Yes, I've put a call in with my Accountant as well.

[MrButton]

1 - I read that you can’t MVL/ER with this setup. But speak to an MVL specialist first.

[ChimpMaster]

An interesting idea but not one I would have thought to do.

Look at creating a group structure with a holding company that owns both LTDs. You can then pass up dividends from the IT Ltd to the Holding Co and then down to the SPV. No personal tax is due at this point because the funds are still not extracted for personal use.

[DesDixon]

An interesting idea but not one I would have thought to do.

Look at creating a group structure with a holding company that owns both LTDs. You can then pass up dividends from the IT Ltd to the Holding Co and then down to the SPV. No personal tax is due at this point because the funds are still not extracted for personal use.

What are the limitations of the idea? Dividends can be passed from the contracting co to the property SPV.

I have looked at a Group Structure but at the moment, it looks cost quite costly with the accountants i've spoken to wanting over 2k to manage the 3 companies.

[ChimpMaster]

What are the limitations of the idea? Dividends can be passed from the contracting co to the property SPV.

I have looked at a Group Structure but at the moment, it looks cost quite costly with the accountants i've spoken to wanting over 2k to manage the 3 companies.

I can't advise on the technicalities - that's for your accountant to do. £2k/year isn't a lot to pay for management of the 3 companies. I was quoted £3k by an accountant to just set up a group structure!

I never went through with it in the end because I plan to quit contracting (and possibly IT altogether) in the near future, so my plan is to MVL and re-invest into a SPV. Or just sail away.

[Maslins]

I do think generally these plans are worse in practice than theory.

By their nature contracting companies are often reasonably short lived, perhaps a few years. You contract for a while, then get a great permie off/emigration opportunity, so close the company. However you'll likely want the BTL properties for decades. Yes a sensible group structure should mean you can close trading co without impacting investing co...it just seems such a faff.

What's the benefit, avoiding the interest relief restriction for personal mortgages? How long will that remain in place without it drifting to companies too?

Cons outweigh the pros IMHO.