B2L as a business?

[b0redom]

Hi All,
With the current credit crunch, and house pricing collapse, I'm seriously considering buying some property to let out. My plan was to set up a new company - MyCo Holdings and fund the property purchase through a loan from MyCo.

Ideally I'd like to grow the company over time to the level where MyCo can become a minor entity, and I would be able to draw my pension from MyCo Holding's earnings.

Is there any reason to hold property personally, rather than through a company? I'm not planning on making a quick buck on this, I expect to do this over at least 20 years, and to start to buy in a year or so....

[ASB]

Hi All,
With the current credit crunch, and house pricing collapse, I'm seriously considering buying some property to let out. My plan was to set up a new company - MyCo Holdings and fund the property purchase through a loan from MyCo.

Ideally I'd like to grow the company over time to the level where MyCo can become a minor entity, and I would be able to draw my pension from MyCo Holding's earnings.

Is there any reason to hold property personally, rather than through a company? I'm not planning on making a quick buck on this, I expect to do this over at least 20 years, and to start to buy in a year or so....

It does depend very much on your individual circumstances and objectives. From your description it may well be appropriate but also you need to think about the CGT position on the assets held within the company when you want to liquidate them.

When I was considering this I found this useful:-

http://www.taxcafe.co.uk/propertycompany.html

[Lockhouse]

Hi All,
With the current credit crunch, and house pricing collapse, I'm seriously considering buying some property to let out. My plan was to set up a new company - MyCo Holdings and fund the property purchase through a loan from MyCo.

Ideally I'd like to grow the company over time to the level where MyCo can become a minor entity, and I would be able to draw my pension from MyCo Holding's earnings.

Is there any reason to hold property personally, rather than through a company? I'm not planning on making a quick buck on this, I expect to do this over at least 20 years, and to start to buy in a year or so....

I would suggest a search on these very fora where this subject has been much discussed.

In a nutshell; IMVHO Buying property through your company is in general not as good a move as owning it personally. I have a BTL owned by myco and would not advise it unless you have a particular reason why you think it would work for you. Tax savings upfront on purchase are generally outweighed by lack of flexibility and this includes extra tax on selling. I know you say that you wouldn't sell and would use the property as your pension but who knows what will happen in 20 years time?

[b0redom]

I would suggest a search on these very fora where this subject has been much discussed.

I did try, as I remember seeing a similar thread, unfortunately BTL and B2L strings are too short for the search criteria.

In a nutshell; IMVHO Buying property through your company is in general not as good a move as owning it personally. I have a BTL owned by myco and would not advise it unless you have a particular reason why you think it would work for you. Tax savings upfront on purchase are generally outweighed by lack of flexibility and this includes extra tax on selling. I know you say that you wouldn't sell and would use the property as your pension but who knows what will happen in 20 years time?

What extra tax? I already have a 2nd property I've owned for quite some time, and I know I'll have to pay CGT when I come to sell it. I was under the impression - probably incorrectly - that trading through a company, I wouldn't be eligable for capital gains taxes - just CT on the profits from the sales?

I was also hoping to offset current CT as buying a property is a purchase, and will reduce the 'profit' of the company. Of course IANAA.

[b0redom]

When I was considering this I found this useful:-

http://www.taxcafe.co.uk/propertycompany.html

Cool I'll check it out.....

[ASB]

Cool I'll check it out.....

actually I think you get second hand copies turning up on Amazon, but make sure its the current one. I'd willingly you give you mine if I could find it (but it's a bout 5 years out of date).

Since you are struggling to find the old threads, here's a few:-

http://forums.contractoruk.com/accou...e-renting.html
http://forums.contractoruk.com/accou...tment-tax.html
http://forums.contractoruk.com/accou...rough-ltd.html

Another thing to consider is that if the property is "holiday" in nature rather than residential different rules apply. Also if it is commercial property it is different rules. Thus there is probably a different case to be made for these types of property as to whether it should be owned individually or corporately.

[ASB]

What extra tax? I already have a 2nd property I've owned for quite some time, and I know I'll have to pay CGT when I come to sell it. I was under the impression - probably incorrectly - that trading through a company, I wouldn't be eligable for capital gains taxes - just CT on the profits from the sales?

I was also hoping to offset current CT as buying a property is a purchase, and will reduce the 'profit' of the company. Of course IANAA.

Ok, it's slightly confusing. Companies pay corporation tax on their chargeable gains. So it's a terminology thing really.

Asset purchase does NOT reduce profit. There is nothing chargeable (except any first year chargeable depreciation).

However, there may still be some enterprise zones where purchase of certain types of property does give rise to substantial available relief. Though this might lead one to question why the government are prepared to effectively bribe you to invest in these areas.

[b0redom]

Aha, I was under the impression that purchasing assets reduced the profit of the company, as this isn't the case, it would seem that the numbers may need looking at again.

Thanks!

[Lockhouse]

Aha, I was under the impression that purchasing assets reduced the profit of the company, as this isn't the case, it would seem that the numbers may need looking at again.

Thanks!

Also that's assuming you don't want to take the cash out of the company if you ever need to sell up - in which case you'll pay 18% CGT if you close the company or divvis if you don't - as rental property does not qualify for Entrepreneur's Relief.