Buying a flat

[Thaumaturgus]

As a midlands-based contractor, I often find myself compelled to work in the "Silicon Corridor" along the M4. Rather than the usual B&B/lodging/killer commute arrangements, I have been contemplating investing in a "deceptively spacious" flat in one of the jewels of the Southeast, possibly Reading or Slough.

Is it best to do this myself or through the Ltd. Co? Would probably want a 50% mortgage.
What happens if I take a 6-monther in Dumfries and want to rent it out for a while?

I'd be glad to read of any relevant experiences.

Th

[prozak]

As a midlands-based contractor, I often find myself compelled to work in the "Silicon Corridor" along the M4. Rather than the usual B&B/lodging/killer commute arrangements, I have been contemplating investing in a "deceptively spacious" flat in one of the jewels of the Southeast, possibly Reading or Slough.

Is it best to do this myself or through the Ltd. Co? Would probably want a 50% mortgage.
What happens if I take a 6-monther in Dumfries and want to rent it out for a while?

I'd be glad to read of any relevant experiences.

Th

If this is an investment property then consider getting some advice.

First port of call. TaxCafe Property Company Tax Advice Guide

I've not read this particular book. But I have read others and for £25 they are an excellent starting point and often tell you enough for you to DIY it or instruct your accountant in detail.

[Clare@InTouch]

To some degree it depends on your long term plans. If you're going to be closing your company at any stage then the flat would need to be sold to you, and that would involve the usual costs such as stamp duty and legal fees. It might also cost you extra because the deal would have to be done at arm's length (what you would charge an unconnected third party).

You could keep the company open and rent the flat out long term, turning the company into an investment for your retirement. Whether or not this appeals depends on how old you are and how much cash you have sat in the company.

If you own it personally then any rent you recieve will be part of your overall income, and you'll need to consider that when tax planning and taking dividends.

It's one of those long conversations that could digress into other tax planning areas, so a good one to talk through with your accountant.

[Kanye]

A lot of people advise against this but it seems like an absurdly tax efficient thing to do to me as a complete amateur.

You'll have no income tax to pay as you aren't withdrawing the cash from your company.

I assume it would count as a cost to the business, reducing your liability for corporation tax.

And then beyond the tax, it would pay it's own way in terms of not renting locally or paying for hotels.

Am I missing something huge here?

[Clare@InTouch]

A lot of people advise against this but it seems like an absurdly tax efficient thing to do to me as a complete amateur.

You'll have no income tax to pay as you aren't withdrawing the cash from your company.

I assume it would count as a cost to the business, reducing your liability for corporation tax.

And then beyond the tax, it would pay it's own way in terms of not renting locally or paying for hotels.

Am I missing something huge here?

It wouldn't reduce your CT that much as it would be a capital asset, not an expense. Investment property generally insn't depreciated and capital allowances would be minimal.

The amount of CT you'd save by charging running costs through the company would be offset by the amount of extra tax you're paying by not incurring accomodation costs if you rented privately. Of course you're still saving the actual accomodation costs themselves, leaving more cash in the company to withdraw.

[slogger]

It wouldn't reduce your CT that much as it would be a capital asset, not an expense. Investment property generally insn't depreciated and capital allowances would be minimal.

The amount of CT you'd save by charging running costs through the company would be offset by the amount of extra tax you're paying by not incurring accomodation costs if you rented privately. Of course you're still saving the actual accomodation costs themselves, leaving more cash in the company to withdraw.

one thing i was wondering though is - if I had enough cash in ltd company acct to buy house/flat outright isnt it saving me 20% in tax by buying through company rather than paying a dividend and then using cash to buy personally- or am I missing something here?

Obviously issues when come to sell property - but if long term and never intend to sell is it worth doing this way - especially if any costs can be offset against company profits..

[Clare@InTouch]

one thing i was wondering though is - if I had enough cash in ltd company acct to buy house/flat outright isnt it saving me 20% in tax by buying through company rather than paying a dividend and then using cash to buy personally- or am I missing something here?

Obviously issues when come to sell property - but if long term and never intend to sell is it worth doing this way - especially if any costs can be offset against company profits..

Potentially yes - that's why I said it really depends on your long term plans.

If you had planned to build some cash up in the company and then close under ESC C16 the purchase of such an asset could throw a spanner in the works. On the other hand you could buy a property or two and use the income it generates to provide a nice income, being able to control how much you earn as it's held in the company rather than by you personally.

[northernladuk]

one thing i was wondering though is - if I had enough cash in ltd company acct to buy house/flat outright isnt it saving me 20% in tax by buying through company rather than paying a dividend and then using cash to buy personally- or am I missing something here?

Obviously issues when come to sell property - but if long term and never intend to sell is it worth doing this way - especially if any costs can be offset against company profits..

You are missing what most people do when they talk about company money. If you buy it with COMPANY money it belongs to the COMPANY. If you buy it with YOUR money it belongs to YOU. You cannot buy a flat for YOU with COMPANY money.

It becomes an asset to the company, any profits are made to the company. To get the profits out you get taxed on it yadda yadda yadda.

Am not saying it isn't worth doing. Yes it could be, I don't really know but you have to start off with the right mindset to understand the situation.

[Jog On]

Can you not buy it as an investment through a pension then rent it to your LTD like Doctors, lawyers,accountants do?

You could then sub let it when you aren't using it but when you're LTD is paying the rent that is tax deductible no? When it's rented to someone else the rent goes into a tax efficient pension?

Edit - just done some digging and it appears you can buy a hotel room as a BTL investment through a SIPP as it is classed as commercial property:

http://en.wikipedia.org/wiki/Self-in...rsonal_pension

All assets are permitted by HMRC, however some will be subject to tax charges. The assets not subject to a tax charge include: [1]

Stocks and shares listed on a recognised exchange
Futures and options traded on recognised futures exchange
Authorised UK unit trusts and OEICs and other UCITS funds
Unauthorised unit trusts that do not invest in residential property
Unlisted Shares
Investment trusts subject to FSA regulation
Unitised insurance funds from EU insurers and IPAs
Deposits and deposit interests
Commercial property (inc. hotel rooms)
Ground rents (as long as they do not contain any element of residential property)
Traded endowments policies
Derivatives products such as a Contract for difference (CFD)
Gold bullion, which is specifically allowed for in legislation [2]

[slogger]

You are missing what most people do when they talk about company money. If you buy it with COMPANY money it belongs to the COMPANY. If you buy it with YOUR money it belongs to YOU. You cannot buy a flat for YOU with COMPANY money.

It becomes an asset to the company, any profits are made to the company. To get the profits out you get taxed on it yadda yadda yadda.

Am not saying it isn't worth doing. Yes it could be, I don't really know but you have to start off with the right mindset to understand the situation.

I do appreciate the difference yes - however benefit I'm after is me receiving the income not the 'owning' of an asset - even though I own the company and so indirectly control what happens to the property :-)
appreciate things could happen to company and assets could be targeted etc - e.g. if ltd goes bust/gets sued (am insured)