Reply to: Buying portion of my main residence as office space

[Maslins]

I’m thinking of semi-retiring and work 3-6 months a year so I can’t close off the company and withdraw a large sum easily.

Any suggestions, anyone?

Then just keep making your mortgage repayments from the salary/dividends you take from your company going forward. The simplest solution is often the best.

[Jimsum]

This sounds like a complete and utter mess.

If you're planning to retire soon, I would simply look into shutting down and getting all of your retained profit out in the most tax efficient way possible (MVL if the profits are high enough) then use the money to pay off your mortgage.

Thank you all for your replies including the humourous ones

Doesn’t sound like the Accountant’s advice seems legit so good to run it past on this forum.

Cyclic Programmer, the most obvious solution would be to close the company. However, I’m thinking of semi-retiring and work 3-6 months a year so I can’t close off the company and withdraw a large sum easily.

Any suggestions, anyone?

[Old Greg]

Have you considered selling a portion of the house to a Dutch Antilles trading vehicle? It will take out an option to purchase after 1 year, priced in a range of high fluctuation currencies, and you individually select the most advantageous currency at the end of the year. Then the vehicle lets it to YourCo and the VAT is recycled back to you via a US sovereign Indian Reservation film production trust.

All perfectly above board.

[northernladuk]

An Accountant I know suggested that I assign a portion of the house to the business say 10% as I work from home.

An accountant I know kept his clients CT payments and blew it on hookers. Not all accountants do it right.

That said I've heard stories like this before. A contractor friend from many years ago had an accountant that told him to lease a Cayman S and put the lease payments through the company as an expense. He then advised he bought the car at the end of term and sell him to himself at a considerable loss. He didn't get caught so now the accountant things he's the bee's knees.
I do think there are some guys out there that will push the envelope because they know how few people go through investigations. If you ask them, will this work and will I get caught they'll say of course not. If you ask what happens if I do they go all quiet and say you won't. There are fly by nighters in any industry I guess.

[Lance]

Nope.

I struggle to believe a qualified accountant has recommended this. There would be so many negative knock on consequences. Sounds more like the idea of an "expert" you meet in the pub.

Nominations for best response of the year are now open.

[TheCyclingProgrammer]

I’d like to pay off the remaining mortgage on my house from the funds in the limited company as I’m approaching retirement. An Accountant I know suggested that I assign a portion of the house to the business say 10% as I work from home.

Then I could take 10% of the value of the property say £80,000 from the business account and pay off the mortgage. This amount is then capitalised in the year end accounts.

When it comes to selling the house, the CGT on the non-principle residence part is minimised by using both our CGT allowance plus entrepreneurs relief.

Has anyone heard of or done this .

This sounds like a complete and utter mess.

If you're planning to retire soon, I would simply look into shutting down and getting all of your retained profit out in the most tax efficient way possible (MVL if the profits are high enough) then use the money to pay off your mortgage.

[TheCyclingProgrammer]

I completly forgot about that, can you back date any claims for this £4 a week?

How far back are we talking? Honestly, I don't know if there's a limit on how far back you can claim, might be worth checking with your accountant. If I were to hazard a guess I would say it should be fine. I claim mine annually at the end of each company financial year (£216 annually).

[sal]

I’d like to pay off the remaining mortgage on my house from the funds in the limited company as I’m approaching retirement. An Accountant I know suggested that I assign a portion of the house to the business say 10% as I work from home.

Then I could take 10% of the value of the property say £80,000 from the business account and pay off the mortgage. This amount is then capitalised in the year end accounts.

When it comes to selling the house, the CGT on the non-principle residence part is minimised by using both our CGT allowance plus entrepreneurs relief.

Has anyone heard of or done this .

Don't trust a word this accountant is saying in a professional capacity. Utter rubbish, there is no term "assign portion of the house". As previously discussed in this thread there are ways for YourCo to purchase portion of your home, rarely if ever worth it and definitely by using company funds to pay out your mortgage...

If you follow the "accountant" advise it will most likely be treated as £80k director loan by HMRC with all that entails. GL

[Maslins]

Has anyone heard of or done this .

Nope.

I struggle to believe a qualified accountant has recommended this. There would be so many negative knock on consequences. Sounds more like the idea of an "expert" you meet in the pub.

[SimonMac]

Terrible idea, which should become very apparent if you even spent 10 minutes thinking about it.

Do one of the following three things, whichever works out best for you in terms of expenses recouped/the amount of paperwork and hassle you can be bothered with:

1) Claim £4/week or £18/month use of home from YourCo, no questions asked,

I completly forgot about that, can you back date any claims for this £4 a week?

[northernladuk]

Doesn't need to. Just don't need to get caught.

[Paralytic]

I’d like to pay off the remaining mortgage on my house from the funds in the limited company as I’m approaching retirement. An Accountant I know suggested that I assign a portion of the house to the business say 10% as I work from home.

Then I could take 10% of the value of the property say £80,000 from the business account and pay off the mortgage. This amount is then capitalised in the year end accounts.

When it comes to selling the house, the CGT on the non-principle residence part is minimised by using both our CGT allowance plus entrepreneurs relief.

Has anyone heard of or done this .

Did the accountant actually recommend this as part of a service or was this just "bloke down pub" talk? I can see this fret with complexities and risks.

eg, if you're assigning 10% of the house to the company (are you suggesting the company buy this?), then you're notionally saying that the company owns 10% of the debt of the house (mortgage). If you're then using that ownership of the house to to allow the company to pay off £80K of the mortgage, surely that would only work if the outstanding mortgage is £800K? Otherwise, you're using company funds to pay off your personal debts. Even then, i'm sure there's other implications.

Or are you saying that the £80K effectively buys the 10% of the house (so the house is worth £800k) and you then use that money personally to pay off the mortgage. If so, then you're asking the same question as post 1 here.

Would be interested in hearing some professional input on this, but i just can't see how this would work.

[Jimsum]

Payoff remaining mortgage from ltd company

I’d like to pay off the remaining mortgage on my house from the funds in the limited company as I’m approaching retirement. An Accountant I know suggested that I assign a portion of the house to the business say 10% as I work from home.

Then I could take 10% of the value of the property say £80,000 from the business account and pay off the mortgage. This amount is then capitalised in the year end accounts.

When it comes to selling the house, the CGT on the non-principle residence part is minimised by using both our CGT allowance plus entrepreneurs relief.

Has anyone heard of or done this .

[Lance]

I’ll answer the question differently.
Your company can probably buy a portion of your house.
Go find a conveyancing solicitor and talk to them.
I reckon the plan does about 30 seconds in, and the laughter of the solicitor carries on for about 10 minutes while they tell you why it’s such a bad idea.
They’ll probably do it for free as well.

[TheCyclingProgrammer]

Can you even legally use residential property as office space? Home office is one thing, but the moment a Company starts paying rent to allow it's employees to use the property as office different rules would apply.

Legally? There's no laws against it. You may of course need to consider:

* Your mortgage terms. Will your lender mind you sub-letting a part of your home, even if it's only to a business that you own. This may or may not depend on whether it's only used by you and your family.

* If you rent, it's likely that sub-letting is against the terms of your lease.

* Could it increase the chance of you being liable to business rates? As a rule, councils don't tend to apply business rates to portions of a home that are used for clerical business purposes if they aren't receiving visitors and are only used by the homeowner and it doesn't substantially change the residential nature of the property. This may still be the case if you have a rental agreement with YourCo but it does formalise the business nature of part of your property so you would need to speak to your council to find out.

Of course, we all know that having a rental agreement is nothing more than a mere formality to enable YourCo to pay you rent and change the way in which you treat those payments and you may of course choose to not bother letting your mortgage company/landlord/council know and it seems unlikely they would ever find out about it.