MyCo buying %age in house

[Scrag Meister]

Probably been asked somewhere before but couldn't find it and I did search (@NLUK :-) )

My daughter and her fiancee are fed up with paying someone else's mortgage.

What are the pros and cons of MyCo buying a %age of a property by way of the deposit, so that they can then have a smaller mortgage and get their feet on the property ladder?

Trying to find the best way to help them out, whilst being tax efficient.

I know I could take it out as personal income but then there would be a large tax hit.

Any ideas? Thanks.

[malvolio]

Probably been asked somewhere before but couldn't find it and I did search (@NLUK :-) )

My daughter and her fiancee are fed up with paying someone else's mortgage.

What are the pros and cons of MyCo buying a %age of a property by way of the deposit, so that they can then have a smaller mortgage and get their feet on the property ladder?

Trying to find the best way to help them out, whilst being tax efficient.

I know I could take it out as personal income but then there would be a large tax hit.

Any ideas? Thanks.

There's you, there's YourCo and there's your daughter. Three separate legal persons. Three separate taxation positions. They are not interchangeable.

About the only way I can see is if YourCo buys the house, then sells it on to them via a mortgage Except that yourCo woud then get a CGT hit, probably greater than your personal tax on a divi.

[ChimpMaster]

You might be better off re-mortaging your own property and loaning your daughter the money. Just make sure the money is 'marked' as yours, to keep the fiancee's mits off it in case things don't work out.

[Martin@AS Financial]

Probably been asked somewhere before but couldn't find it and I did search (@NLUK :-) )

My daughter and her fiancee are fed up with paying someone else's mortgage.

What are the pros and cons of MyCo buying a %age of a property by way of the deposit, so that they can then have a smaller mortgage and get their feet on the property ladder?

Trying to find the best way to help them out, whilst being tax efficient.

I know I could take it out as personal income but then there would be a large tax hit.

Any ideas? Thanks.

Limited Company finance is pretty hard to come by these days as there are only a handful of lenders operating in this area. Essentially, if you wish to go down this route, you will normally need to set up a seperate company which is specifically used to buy and sell properties. You will also need to give personal guarantees. It may well be cheaper to refinance your existing home to take the deposit out of that instead as Chimp Master says above.

Hope that helps.

[Greg@CapitalCity]

I know I could take it out as personal income but then there would be a large tax hit. Any ideas? Thanks.

I know the thought of loaning yourself company money might not sit well with some contractors - but if you have retained earnings attracting 0.1% interest in the bank, you could consider taking that out as a loan to yourself (and then lending it to your daughter). There are a couple of traps with this that you need to be aware of (a. if the loan exceeds £5k then you should pay interest on the loan at a rate of 4% to avoid a benefit in kind charge, and b. S455 corporation tax charge), but its a starter for ten.

[Jessica@WhiteFieldTax]

A company owning a property, or part of a property isn't generally recommended:

(a) part loss of Private Residence Exemption for CGT

(b) unfavourable CGT regime in a company

(c) risk of contaminating assets and trading, can effect closure of your company in the future

(e) risk of asset being caught if company ceases trading insolvently, eg a large bad debt from agent / client

Better options:

(i) loan to your daughter direct

(ii) loan or dividend to yourself and onwards gift / loan to daughter

(iii) loan or dividend to yourself and you part purchase part of property (again risk of loss of PPR as (a) above)

Best talk to your accountant about how i, ii, iii sits with you. The upfront tax hit tends to be the lesser of the evils.

[Notascooby]

Why not get yourself a Buy-2-Let mortgage then let it to your daughter?

You could:

a) subsidise the mortgage
b) become their landord at no profit until they can afford to get their own place, you then have a nice rental property
c) some other combo

Advantage is that in the short-term you'll be in control of the house if things go worng, where you can boot him out. If all goes well then you can transfer the house to them later.

[lithium147]

What about if the OP loans himself the money, and then buys the propert in conjunction with the daughter?
Perhaps they coud have a 50% ownership each (or 33% each if including hubbie).
So there would be 2 (or 3) names of the property deed.
What would be pro's/con's of this approach?

[MarillionFan]

Can't you use your SIPP in someway (as an investment)?

[Jessica@WhiteFieldTax]

What about if the OP loans himself the money, and then buys the propert in conjunction with the daughter?
Perhaps they coud have a 50% ownership each (or 33% each if including hubbie).
So there would be 2 (or 3) names of the property deed.
What would be pro's/con's of this approach?

Still screws up PPR. Given most people are expecting capital growth from their home, it's not a good plan IMV.

Loan her the money and take a second charge over the house of necessary.