Buying a property to live in (main residence) via LTD - TAX IMPLICATIONS?

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

    Buying a property to live in (main residence) via LTD - TAX IMPLICATIONS?

    I wanted to buy a property under LTD. I would use this property as my main residence.
    My intention would be to live in this property. I would not rent it out in long term or at least for 10 years.
    I would be the main and the only director of this company.
    What are the tax implications?
    Would I need to pay any addition tax or would my residence be treated as benefits in kind as I would not be receiving any rent but living in it.

    If I was to take out money as dividend from LTD and purchase the property under personal name then I would fall into 40% tax but when I run LTD I just need to pay 20% tax each year.
    This option to buy a property to live in would be more realistic specially if the property cost around £650’000.
    I jest wanted to know if this was possible and if there are any tax implications when buying in this way main residence or if I could use it as main residence?

    #2
    Not much of that makes any sense.
    I'd talk to an accountant.

    When you own the property you live in, there's neither income or expense, so tax isn't, generally, relevant.
    Owning the property you live in via a company will be next to impossible if you want a mortgage.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      I would say benefit in kind at the full market rent.

      It will probably also ring alarm bells at HMRC, so your tax position would need to be watertight.

      Comment


        #4
        It sounds a bad idea. You'd be caught by both the 3% SDLT surcharge and, when you sell, corporation tax on any capital gain. In addition, I would guess it'd be difficult getting a mainstream mortgage for this arrangement (you may need to go to a specialist lender which would charge rather higher interest rates, or you may find that it isn't possible at all).

        Comment


          #5
          1. If you use a company to buy a residential property valued £500,000 and £1 Mil , there is an annual levy ( ATED ) of £3650 .

          The company will also pay corporation tax at 19% on any profit ( capital gain ) after selling the property .

          If you as director live in the property and pay no rent, you will be charged annual tax at 40% on the "director's benefit" ,

          If you draw out cash from the company in the form of a dividend , you will have to pay 32.5% on the dividend.

          2. If you buy the property to hold under your own name and live in the property as your main residence, the capital gain made during your period of residence is exempted ( = NIL cgt.).

          If you rent out the property after a few years residence, the capital gain is apportioned between the own residence period and rental period . The capital gain under the rental period will be charged cgt at 28%.

          3. If the property is held for 10 years only , I would expect to see a 30% rise in property value ( £650K) = £195K and holding under personal name gives the Nil capital gains tax ( =best result)..

          But if the company holds the property, the company make a profit of £195K and the corporation tax is approx £37K and £195K - £37K = £158K is retained by the company.

          You need advice from an accountant on whether a director can borrow from the company at say 0.5% interest.rate. .

          Comment

          Latest Activity

          Collapse

          • Another Form 17 Question. Avoiding 60% TAX
            RobR
            Hi Forum, Please be gentle on a new member and first time poster.

            Hopefully, someone will be able to assist me in an area I realise has been covered numerous times. Currently, I have trawled the internet, spoke with my Accountant and Solicitor, to say I have received conflicting information...
            22-03-2019, 14:16 PM
          • transfer title or deed of trust regarding CGT reduction
            neilm
            Hi All
            I am selling a BTL which is currently in my name only. In order to reduce the CGT would I need to transfer the title to include my wife or would a deed of trust suffice?
            08-02-2019, 09:32 AM
          • Reply to transfer title or deed of trust regarding CGT reduction
            Kape65
            So is it possible to use a dot to transfer beneficial ownership to ones spouse who is not named on the legal title? I was under the impression that this couldn't be done. Would the mortgage company not block such a thing?
            21-03-2019, 23:08 PM
          • Reply to transfer title or deed of trust regarding CGT reduction
            jpkeates
            There are a number of different types of trust.

            One that owns property usually has to be formally recorded with HMRC as a separate entity and has to submit its own tax return annually.
            A simple trust to change the beneficial ownership is a different type of trust, which simply requires...
            20-03-2019, 15:35 PM
          • Repairs to property and tax
            themanlike
            Hi there,

            I am new, but have been referred here as a good place to get advice on everything Landlord related.

            Does anyone have any advice on the below, please?

            I and two others own a leasehold flat each in a converted building (big house)
            We are also directors...
            20-03-2019, 11:31 AM
          • Reply to Repairs to property and tax
            themanlike
            Thank you, that provides more clarity - appreciate it. I will review my lease and come back with further info.

            Many thanks
            20-03-2019, 14:12 PM
          • Reply to Repairs to property and tax
            leaseholder64
            With a normal lease, the money would not appear on the company balance sheet, so would not be visible to Companies House. It would be held under a statutory trust (L&T 1978 s42) and any interest would be taxed at discretionary trust rates (currently nil where the the tax would otherwise be less...
            20-03-2019, 14:04 PM
          • Reply to Repairs to property and tax
            themanlike
            Thank you for your response, I appreciate it.

            Let me correct myself when I say nominal - that number is calculated based on long terms works that need doing on the property (painting in the communal areas), and ongoing maintenance (gardener, cleaner - for communal areas). We never keep...
            20-03-2019, 13:27 PM
          • Reply to transfer title or deed of trust regarding CGT reduction
            AndrewDod
            There is no such law or rule in general (for example with a DoT giving beneficial ownership to my child).

            Indeed such a rule would make no sense since one can have only four trustees, but many more owners than that. The ruling relates to ownership (which the DoT is). What is the case is...
            20-03-2019, 12:54 PM
          • Reply to Repairs to property and tax
            leaseholder64
            I think you have rather more problems than just tax!

            You cannot charge a nominal service charge. The service charge needs to be based on realistic estimates of the cost of doing those things that the the lease requires the freeholder to do, and under and overestimates should be corrected...
            20-03-2019, 12:05 PM
          Working...
          X