Benefit in Kind.

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    Benefit in Kind.

    My brother and I are the directors of the company whose 3 leaseholders jointly own the freehold to the three flats in the property. To date we have granted, at no charge, 2 lease extensions of 999 years one for a leaseholder/shareholder who was not a director and one to ourselves as a leaseholder/shareholder. However we have been advised by a leaseholder/shareholder that when we issued the second lease extension as directors to ourselves as leaseholders "that this will result in a benefit in kind on you, upon which you will be liable to pay income tax at your marginal rates, and [the company] will be liable to employer’s NI [1A] on the benefit although as correct procedure was not carried out at the time, the company can claim that back from the directors involved. Therefore, the company is legally obliged to issue P11Ds and report them to HMRC." What is the position please?


    #2
    To simplify my earlier post. Do the directors of the company which owns the freehold gain a 'Benefit in Kind' when they give themselves as leaseholders a lease extension for free. They had already given a similar lease extension for free to another leaseholder.

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      #3
      The value of the freehold decreases by roughly the same about as the benefit you gain as lessee. I can't see this is an overall benefit or taxable.

      The fact that you are a Director is not relevant one way or the other (of course you cannot make decisions as Director that are in your interest whilst treating ordinary shareholders differently - but you are not doing that). .

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        #4
        Managing Rental Properties :
        (A) Under Self management and sole trader :

        Pros : (1) Maximises rental profit for property owner.
        ( 2) Rental profit declared in SATR tax return
        ( 3) lower interest rate for mortgage loan

        Cons : (1) cannot charge for own labour
        ( 2) Chargeable Expenses limited to payment to other parties .
        ( 3) Rental profit added to job income and taxed at 20%. 40% or 45%.
        (4) Dealing direct with rental tenant.

        (B ) Under Ltd Company .

        Pros : (1) Separate legal entity and separate tax return
        (2) Max imum company tax rate is 19%
        (3) Director can be paid salary.

        Cons : (1) Filing Annual Accounts to Companies House.
        (2) Liability for National Insurance for employees.
        (3) Filing company tax return
        (4) Requires 2 directors .

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          #5
          Sorry, above reply posted to wrong thread,

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            #6
            If the company is not trading with outside parties, it is holding the freehold title on behalf of the 3 leaseholders.

            When the leaseholder is on both sides of the extension and the transaction is "done at no charge", its treated as "trading with yourself" and there is no capital gain.

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