property investment and tax

[The Master]

JMorley, I am the Master and you will obey me... get an accountant today. There is too much money at stake for you to rely on uninformed amateur opinion and guesswork.

[simondolan]

Advice

I can end your research here for you....

You can't claim Capital Allowances against a residential property (which I suspect is what you have purchased).

The Cash invested sits on the balance sheet as an asset and as such does not affect your tax liability at all.

So, assuming you made £14k profit, you would pay tax on that £14k

[hyperD]

Here endeth the lesson.

[ASB]

Well, you've had the accountant advice and it is sensible. However from what you say I think you are a bit confused. I'll try and help

You seem to have misunderstood the relationship between profit, tax and capital allowances. The purchase of an asset has no affect whatsoever on the profit figure, and therefore the CT. i.e. assets are purchased out of retained (taxed) shareholders funds.

Capital allowances are claimable on assets, in the case of most property this is nill. This will have the affect of reducing the profit chargeable to CT by the amount of capital allowance.

As a side issue owning property through your company is usually a very bad idea. However it depends upon your circumstances and intentions. In answer to the inevitible question "why" then you would need to do some research based on your actual circumstances. "Using a property company to save tax" is a good introduction. But it costs.

There is no legal requirement to use an accountant, I declare my accounts openly and am happy for the Revenue to do ther job and correct me

That is hilarious. Correcting you is not the revenue job. It is your duty to get it right. Do you have the faintest idea of the sort of cost of "putting it right" when all you have done is made an innocent mistake?

Minimum penalties on the tax owed are normally 40% (occasionally you'll get away with 20% but onliy in the event of self disclosure). Then there is statutory interest (compounded of course). Normally the cost of representation will be a small number of thousands, unless a comissioners hearing is involved.

Your suggested treatment of your company revenue puts CT on 14k at stake (if you happen to be wrong of course). The likely cost when the revenue get to you in 6 years time will be in the order of 8-10k. Do you really think it's worth staking that against the cost of getting proper advice?

edit: Simon beat me to it whilst I was typing.

[Bradley]

Property

I run a limited company and have purchased a property through the company. I suspect that I can write the cash invested in the property against tax as a Capital Allowance, however, am unsure. Can anyone tell me whether this is so and how I should describe it in my annual accounts?

Many thanks

Don't buy property through a company. When you eventually sell any gain is taxed in the company. You may then have to pay tax again to get the cash on disposal out of the company. You also lose the personal tax exemptions associated with holding investments personally.

I'd transfer the asset out before it generates a gain.

[Cyber Controller]

Leave the poor bloke alone. He's quite happy to take the rap if he gets it wrong (which he has). Means less tax to pay for the rest of us.

[oxtailsoup]

I can end your research here for you....

You can't claim Capital Allowances against a residential property (which I suspect is what you have purchased).

The Cash invested sits on the balance sheet as an asset and as such does not affect your tax liability at all.

So, assuming you made £14k profit, you would pay tax on that £14k

And that is why there is a legal section on this forum. There are accountants (not just contractors) who are willing to advise so I think the original post by jmorley was fair enough really. However I would advise getting an accountant.....

[ASB]

Don't buy property through a company.

A bit blanket! [Probably right for > 90% of the time though]

One time when it can be advantageous is if your intention is to build a portfolio of properties relatively quickly and then sell your shareholding to provide anothere investor with a ready made portfolio.

[simondolan]

Property

You also have to consider the cost of taking the cash from the Company in the first place if you are going to invest personally.

£100k taken from the Company to buy a house personally will cost you £25k in Higher Rate tax.

Granted you may have to pay the HR tax on the gain when you eventually sell, but at least the tax is deferred.

You also have to consider taper relief, non business assets etc, so the advice of get yourself an accountant is pretty good!!

[Cyber Controller]

so the advice of get yourself an accountant is pretty good!!

Nah, as he says there's no legal requirement to pay a modest amount for sensible advice from a professional and he's happy to pay the thousands in penalties, fines and interest if he's wrong. Leave it at that.