Buying a house for temporary accommodation

[deebeegee]

Why not buy it personally and let it to the company?

Good question. I don't currently have much in the coffers personallyso I would need to withdraw from myCo for a deposit at the higher rate. Also I already have a primary residence so any gain would be subject to CGT. The rental (after interest payments) myCo would pay to me would be subject to Income tax at the same rate that I would incur on any additional [profit / reduction in expense] if myCo owned it - I think.

I need to do some number crunching but my gut feeling is this would not work out any better

[deebeegee]

As the property will be treated as an investment in the accounts, if it loses value over the time that you hold it then you will not be able to deduct the loss from your trading profit.

This is exactly the kind of nugget I was after to be able to form a better opinion.
I had expected that it would have been deductible and therefore would have been prepared to accept the risk of a small loss, as long as it would have been less than the expense of renting

[deebeegee]

I did try a search before posting but most of the answers were regarding trying to buy a primary property through the company (obviously a BIK) or as an investment which as you correctly point out is probably not the most efficient class for such a short term.

perhaps i should look at the situation differently, suck up the rental cost and look into getting a better return from the capital i would have used to buy the property

[Craig at Nixon Williams]

OK I hear the message loud and clear but can't pretend to truly understand it

Obviously if myCo shows more profit from buying/selling than from renting then it will pay more tax but the net position for its shareholders is still positive. My aim is not to minimise the tax I pay (if it was i would just sit on the bench), it is to maximise the net wealth of the business' shareholder(s). if i rent i know my bottom line will be down, if i buy/let i may just break even or make a small profit in which case there will be tax to pay on that but hopefully not more than 100%. of course if i lose then i'd think that that loss would still be deductible in the same way that rent would be

clearly i am missing something. please humour me, i promise i am not a troll!

As NLUK has already highlighted, you will also incur fees in buying/selling the property plus any mortgage interest which together could easily be more expensive than rent, particularly if you don’t need the property for very long. I therefore can’t see how buying this through the company would maximise shareholder wealth.

As the property will be treated as an investment in the accounts, if it loses value over the time that you hold it then you will not be able to deduct the loss from your trading profit.

[b0redom]

Why not buy it personally and let it to the company?

[northernladuk]

OK I hear the message loud and clear but can't pretend to truly understand it

Obviously if myCo shows more profit from buying/selling than from renting then it will pay more tax but the net position for its shareholders is still positive. My aim is not to minimise the tax I pay (if it was i would just sit on the bench), it is to maximise the net wealth of the business' shareholder(s). if i rent i know my bottom line will be down, if i buy/let i may just break even or make a small profit in which case there will be tax to pay on that but hopefully not more than 100%. of course if i lose then i'd think that that loss would still be deductible in the same way that rent would be

clearly i am missing something. please humour me, i promise i am not a troll!

Get your accountant to crunch the numbers for you.

Here is a search from the accounting/legal section showing many posts about property through the LTD. Might find your answer in there somewhere.

https://www.google.co.uk/search?q=pr...nting-legal%2F

[deebeegee]

OK I hear the message loud and clear but can't pretend to truly understand it

Obviously if myCo shows more profit from buying/selling than from renting then it will pay more tax but the net position for its shareholders is still positive. My aim is not to minimise the tax I pay (if it was i would just sit on the bench), it is to maximise the net wealth of the business' shareholder(s). if i rent i know my bottom line will be down, if i buy/let i may just break even or make a small profit in which case there will be tax to pay on that but hopefully not more than 100%. of course if i lose then i'd think that that loss would still be deductible in the same way that rent would be

clearly i am missing something. please humour me, i promise i am not a troll!

[northernladuk]

Thanks for your thoughts. I do appreciate that it might not be ideal to have so much cash tied up in something so illiquid and it would be irritating to have to shift it if the contract was canned early. On the flip side I am only considering Bristol as I quite like the place and could envisage finding myself there temporarily again in the future. London will always be my home though. Suppose I would rent it out when I'm back here either working or on the bench.

Any profit on it would be a bonus and so I wouldn't be too concerned about the tax implications on that. I was simply thinking that if it more or less breaks even then that is far better than 8-12k on rent, even if that is tax deductible.

and the tax getting profit out of the company and the tax paid on the profit of the property when sold and the tax getting that out of the company as well yadda yadda...

Speak to your accountant who will crunch the numbers for you but general consensus on here is company owned property is not the best way to go.

[deebeegee]

Thanks for your thoughts. I do appreciate that it might not be ideal to have so much cash tied up in something so illiquid and it would be irritating to have to shift it if the contract was canned early. On the flip side I am only considering Bristol as I quite like the place and could envisage finding myself there temporarily again in the future. London will always be my home though. Suppose I would rent it out when I'm back here either working or on the bench.

Any profit on it would be a bonus and so I wouldn't be too concerned about the tax implications on that. I was simply thinking that if it more or less breaks even then that is far better than 8-12k on rent, even if that is tax deductible.

[northernladuk]

It's generally assumed that buying any property through the LTD isn't efficient due to tax on income, profit and so on. It's gonna cost you 2+k to buy and 2+k to sell for a start. It isn't inefficient in all cases so you need to crunch the numbers but I can't see how buying a house for you to stay in for 5 days a week is going to work in your favour. Yes you can't claim for it when you KNOW you will be there for 24 months and if the contract gets canned you could end up with a white elephant.

Unless buying a property is really in your investment profile I wouldn't consider buying one just for one gig.

[deebeegee]

I am based in London but considering a 12 month contract in Bristol. I have read through threads that relate to claiming rental expenses but nothing on buying. Obviously a contract is only as good as its notice period etc but in theory myCo could buy a small house/flat for the duration using its reserves and assuming it breaks even after buying costs, stamp duty and selling fees there would be no expenses as such and could even represent a decent investment for surplus funds. I would keep my flat in London for my personal use and still consider this to be my residence.

So what is the hook? Would the permanence of buying imply that it is not temporary? I'm guessing either way that after 24 months it would be considered a BIK.

Any other considerations other than the practicalities of buying/selling and the property market in general?