UK LTD owns overseas property, can I use company profit to invest in property

[contractmonkey]

I have a European (Spanish) overseas property that was purchased through my UK Ltd company. The property has no mortgage.

It generates no profit for the business as it is only used by the Directors. My question is this:

Can I use company profits to improve the property? Examples of this would be to install heating for the pool, build new walls where fencing is currently in place. Possible extension of the property, purchasing additional adjoining land.

[stek]

I have a European (Spanish) overseas property that was purchased through my UK Ltd company. The property has no mortgage.

It generates no profit for the business as it is only used by the Directors. My question is this:

Can I use company profits to improve the property? Examples of this would be to install heating for the pool, build new walls where fencing is currently in place. Possible extension of the property, purchasing additional adjoining land.

Seriously? You paying any BIK on this?

This is a sockie, right?

[DirtyDog]

Yes. You'd just need to make sure that when you sell it you pay tax on the capital gain.

And do you need to be paying a market rent for the directors, or do you just declare that as a BIK on your P11D?

[Pondlife]

Seriously? You paying any BIK on this?

This is a sockie, right?

That was my initial thought but a bit of googling suggests there's no BIK

HMRC linky

1. At Budget 2007, the Government announced its intention to bring forward legislation in Finance Bill 2008 which will ensure that individuals who have bought or will buy a home abroad, will not face a benefit in kind tax charge for any private use of the property if purchased through a company.

Any accountants care to comment?

[stek]

That was my initial thought but a bit of googling suggests there's no BIK

HMRC linky

1. At Budget 2007, the Government announced its intention to bring forward legislation in Finance Bill 2008 which will ensure that individuals who have bought or will buy a home abroad, will not face a benefit in kind tax charge for any private use of the property if purchased through a company.

Any accountants care to comment?

Is there a shade of difference here between 'purchased THROUGH a company' and 'purchased BY a company?

[Pondlife]

Is there a shade of difference here between 'purchased THROUGH a company' and 'purchased BY a company?

Dunno


Background
3. Chapter 5 of the Income Tax (Earnings and Pensions) Act 2003 sets out the tax position when accommodation is provided by an employer. Unless covered by a specific exemption a tax charge can arise where a property is provided by an employer to their employees, or to a director, when the property is available for their personal use.

4. Some UK resident individuals have set up or acquired companies to own a property abroad, generally for holiday use. Where they direct the company's affairs (whether through an agent or not) they can be within the scope of the living accommodation charge, although they may not have been aware of this or may have considered that no tax or NICs charge arose in these circumstances (and have not, therefore, reported the matter to HMRC).

5. This proposed measure will remove that tax charge where certain qualifying conditions are satisfied.

6. The exemption will only apply to the benefit in kind charge. It will apply where an overseas property is owned by a company that is owned by individuals and whose sole activity is holding that property for occupation and/or letting. It will have retrospective effect.

[Jeebo72]

I have a European (Spanish) overseas property that was purchased through my UK Ltd company. The property has no mortgage.

It generates no profit for the business as it is only used by the Directors. My question is this:

Can I use company profits to improve the property? Examples of this would be to install heating for the pool, build new walls where fencing is currently in place. Possible extension of the property, purchasing additional adjoining land.

Set up a property company, and transfer your property into that. Any future dev or property purchases can be done via a loan from one company to the other. And at 0%. No matter what anyone on here says. Don't listen to anyone on here (including me, check with your proper accountant not an IT contractor account manager). 99.9% on this forum are IT geeks obsessed by IR35 and being "directors" rather than what they are: code monkeys with too much money for code monkeys.

[stek]

Set up a property company, and transfer your property into that.

Who's property?

[contractmonkey]

There is no BIK so not declarable. I did a lot of background work on this before it was purchased. The only hit will be CGT once it's sold. Bens of doing it through the company:

1 - Avoids inheritance tax - Company is left to kids
2 - Avoids personal taxation

Anyway, I didn't want this to go into the "is the right / wrong way to do this."

I Am talking to the account next week anyway and will be asking their advice then. Just curious if there were any accountants on here reading that would care to reply as I've found out previously that not accountants give quite the same advice

[Jeebo72]

There is no BIK so not declarable. I did a lot of background work on this before it was purchased. The only hit will be CGT once it's sold. Bens of doing it through the company:

1 - Avoids inheritance tax - Company is left to kids
2 - Avoids personal taxation

Anyway, I didn't want this to go into the "is the right / wrong way to do this."

I Am talking to the account next week anyway and will be asking their advice then. Just curious if there were any accountants on here reading that would care to reply as I've found out previously that not accountants give quite the same advice

Remember you can also sell the shares in the company rather than the actual properties which has benefits for both buyer / seller and so can increase value of portfolio. I'm currently doing as I said above, and it works out very well...