Limited Company

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    Limited Company

    When I started to buy more properties, my accountant advised me to form a Ltd Company which I did, he also advised me to keep the one property I then had in my own name because taking it into the company would mean selling it to the company and paying CGT. Tax laws having changed and Ltd Co accounting fees being high, as I (and my wife) own all the shares in the company, can we simply dissolve it and put the properties in our own names or does this entail selling them to ourselves and paying CGT?

    #2
    Companies do not pay capital gains tax but instead have corporation tax levied on their profits. These profits may consist of proceeds from the disposal of assets ie property.

    Corporation tax applies at a scale determined by turnover ie 19% at the lowest rate

    Generally, you would draw the profits as a dividend or repayment of a directors loan (if there is one)

    A dividend would attract tax at 19% as part of the profit distribution and you may pay additional tax at 32.5% via your personals elf-assessment on any dividend amount over the 22% threshold of about £36,000.

    Repayment of a directors loan would not trigger a tax event unless interest was involved.

    Basically, few accountants with even a scant knowledge of property should advise btl properties are held by a company as an individual has advantageous tax breaks for disposing of assets over a company.
    Steve Sims

    Yardleystar Accountancy
    0870 242 1047

    Email: ssims@yardleystar.co.uk

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      #3
      Thanks for the info Steve, makes interesting reading. I have no intention of selling any of the properties but wondered whether it would be financially better to take them out of the company and put them in my and my wife's name.

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        #4
        As the properties are already in the company, you would need to buy them back at market value and this will entail the company in paying Corporation Tax on Capital Gains.

        You will also need to find the funds to buy back the properties from the company, incur mortgage fees, solicitors fees, stamp duties etc.

        In view of this, it would not make much sence to buy them back, especially as the company is paying only 10% and/or 19% tax on its profits. This is compared to presumably 22% and or 40% if they were in your personal names.

        You need to weigh this up against the benefits of taper relief of upto 40% of chargeable gains after 10 years ownership and the annual exemptions in the year of disposal. PPR relief and lettings relief will not be available to you unless you use the property as your PPR at some time in your ownership since buying them back.

        Accounting fees need not be all that much, especially as the requirements to audit or certify them by an accountant is removed for most small companies. However, you need to ensure that the accounts comply with the disclosure requirements of the Companies Act.
        Private advice is available for a fee by sending a private message.

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          #5
          Using a limited company vs. self-employed

          I'd heard that by having properties within a limited company, your own home would be safe if your portfolio went through the floor and your company was declared bankrupt.

          Could I have re-confirmation that owning and running a portfolio is more tax efficient by being self-employed and not through a limited company?

          Many thanks

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            #6
            Operating through a limited company gives you the protection of limited liability, ie, your liability is limited only to the amounts you have actually put into the company. Therefore, if your limited company goes through the floor as you put it, your personal assets are normally not at risk.

            Whether running a portfolio is better in your personal name or through a limited company depends on a number of factors. eg, your personal income and the rates of tax applicable, whether you need to draw the income from your company for your personal needs, whether you wish to retain properties for long periods or sell them regularly, how you wish to pass the assets to next generations etc.
            Private advice is available for a fee by sending a private message.

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