Anyone still looking at buy to let?

[b0redom]

Incorporation relief is available but there are restrictions and precedent is that the property 'business' must bed your main activity (or your wife's).

What do you mean incorporation relief? There's some sort of capital gains allowance to 'sell' and existing personally owned B2L to a newly formed Ltd?

I'm thinking along the same lines here. Will be making a move on this next year, and have been thinking:-
- Perhaps to MVL and cash out completely from IT, and move into property investment full time.

Although potentially appealing, there's no way I can reasonably do this. I only have one B2L currently, and frankly even though I don't really enjoy it any more, IT is easy money.

- A 2nd Ltd is not the way forward because we would be impacted by Associated Companies jurisdiction.

So I'm not an accountant, and I've not come across the Associated Companies rules before, but from Googling it seems to me that I would definintely be caught (as me and the Mrs would be joint holders in PropertyCo and MyCo). It seems that the only potential downside though is that if both companies grossed higher than 300k in a year we'd have a higher tax bill?

Am I missing something, because if I was in danger of earning over 300k, I'd stop contracting for a bit and go sit on a beach! Do associated companies both need to be VAT registered if one is? Am I missing some nasty penalty somewhere?

[ChimpMaster]

What do you mean incorporation relief? There's some sort of capital gains allowance to 'sell' and existing personally owned B2L to a newly formed Ltd?

Although potentially appealing, there's no way I can reasonably do this. I only have one B2L currently, and frankly even though I don't really enjoy it any more, IT is easy money.

So I'm not an accountant, and I've not come across the Associated Companies rules before, but from Googling it seems to me that I would definintely be caught (as me and the Mrs would be joint holders in PropertyCo and MyCo). It seems that the only potential downside though is that if both companies grossed higher than 300k in a year we'd have a higher tax bill?

Am I missing something, because if I was in danger of earning over 300k, I'd stop contracting for a bit and go sit on a beach! Do associated companies both need to be VAT registered if one is? Am I missing some nasty penalty somewhere?

Looks like the Associated Companies (AC) ruling isn't actually relevant now, as of April 2015. It used to be that the £300k small company CT threshold would have been split equally amongst your companies, i.e. £150k each for 2 companies before the higher CT rate was applied. However, now there is a single, lower CT rate of 20% for all companies. This is a good read:-

Corporation tax - Change of rates and new “associated company” rules » Scott-Moncrieff

So it looks like we can have more than one company.

So you could have a Property Ltd and an IT Ltd. Judging by current tax legislation on BTLs, it is worth seriously considering buying only in a Ltd from now on. I will need to look at incorporation relief at some point, which yes allows to CGT mitigation but not so on SLDT (there is 'multiple dwellings relief' for that, though it doesn't save much really).

I'm not an accountant either but I do enjoy reading and ultimately you have to manage your own business(es) because no one else will do that for you

[ChimpMaster]

I've just completed on another one. Took the tax hit on higher dividends to extract up to the £100k mark for personal income and paid cash for the property. Should return ~400 a month with no mortgage to worry about. The new rules are making it progressively less attractive, but the incentive to take dividends this year rather than next was good. The money was earning ~£5 a month so, additional tax aside, it didn't take too much thinking about.

Prices have been pretty static around here for the last few years, i'm not expecting a large capital gain from it so the passive income element is the main factor.

Good on you, beat the SLDT deadline. And you've seen the return against dead money in a Ltd.

I'm a bit stuffed where I live in the SE: just got back from a viewing to see a 3 bed semi today at £350k and there was the usual open day with people pouring in and out. Agent reckons it'll go for £370k and I think it easily will too, even though it needs £10k spent on it. Thing is though, it'll make a great multi-let grossing £2,400/month. Single-let will bring in £1,500/month.

But I'm really of the mind-set that prices will cool around here, because they've shot up 30% in the past year alone. I'm actually taking advantage of that price boom to sell one of mine but having a lump sum sat in my personal account and then a warchest in my Ltd, earning nothing, is a real blow to the investment plans.

[barrydidit]

100k? You bought a suburb of Huddersfield or something? With Golcar thrown in as spare change?

65 - i'd already taken my 40k for the year

There are plenty available sub 70 around here. Not too many for sub 40 which would beat the extra 3% stamp duty charge, and if they are then they're ****ed
2 went as a lot for 73k in a recent auction, my plumber was round there assessing for the guy who bought them - the gas and electric for property 2 was spurred off DIY style from property 1

[KentDogWalker]

65 - i'd already taken my 40k for the year

There are plenty available sub 70 around here. Not too many for sub 40 which would beat the extra 3% stamp duty charge, and if they are then they're ****ed
2 went as a lot for 73k in a recent auction, my plumber was round there assessing for the guy who bought them - the gas and electric for property 2 was spurred off DIY style from property 1

I'll soon have a 50k war chest that I want to invest.

[northernladuk]

I'll soon have a 50k war chest that I want to invest.

Erm.. A warchest is a warchest. It's the money out aside to get to you out of the tulip. The rest you invest....

[b0redom]

Right, what am I missing?

I currently have a personally owned B2L. It's worth about 500k and has an interest only mortgage of 200k on it.

I am considering a new 300k interest only mortgage (this is the purchase price, so as I understand it there will be no tax to pay at this point).

With the 100k I draw from the company I will start a B2L company and buy a couple of properties on an interest only mortgage basis.

As the 100k I've invested will be a director's loan, I will be able to draw any profit out of the B2L company tax free (up to 100k obviously).

This would seem to be having my cake and eating it too. What am I missing?

[zcapr17]

Hi Chaps, I'm keen to hear an update on where you got to with this.

I'm seeing more and more articles about contractors using SPVs to invest in property (either stand-alone, or as a subsidiary of their contracting LtdCo).

I own two BTLs personally at the moment, but it's time I analysed in detail if it's time to switch to using an SPV for future investments.

Can any of you recommend an IFA or accountant that's comfortable with the nitty-gritty?

Thanks.

[Murder1]

Hi Chaps, I'm keen to hear an update on where you got to with this.

I'm seeing more and more articles about contractors using SPVs to invest in property (either stand-alone, or as a subsidiary of their contracting LtdCo).

I own two BTLs personally at the moment, but it's time I analysed in detail if it's time to switch to using an SPV for future investments.

Can any of you recommend an IFA or accountant that's comfortable with the nitty-gritty?

Thanks.

I'd appreciate any IFA/Accountant recommendations around this. My current accountant doesn't want to know due to "added complications", or thinks I should just take the tax hit and purchase the BTL personally.

[northernladuk]

Do you want and IFA or an accountant? Which is it?