Buying a property through company or via loan to SPV

[ChimpMaster]

Hi ChimpMaster, I'm in a similar position to where you were (surplus profit in ltd company and want to invest without going down MVL route) but as hard as I try, I can't get a definitive explanation of what to do from my accountant. Any advice / help gratefully received.

Who is your accountant? i.e. think about whether they know enough to be able to advise you on property investing/accounting. Else PM me and I'll send you my accountant's details. He is well versed in IT and in Property accounting.

There are a number of ways in which you can utilise existing funds to invest in property, for example:-

1. Create a Holding Company (group) structure.
2. Loan from IT company to Property company (SPV)
3. Buy property within your IT company - not usually recommended.

These options assume you don't want to extract the Ltd funds personally and then buy the properties.

There is already a fair bit of info on this thread and elsewhere on the 'net but feel free to ask any specific questions you have.

I went with option 2. There are ways in which to deal with this loan eventually. My choice is to re-mortgage the property and pay back the loan so that I can eventually MVL the IT company.

[wattaj]

Who is your accountant? i.e. think about whether they know enough to be able to advise you on property investing/accounting. Else PM me and I'll send you my accountant's details. He is well versed in IT and in Property accounting.

There are a number of ways in which you can utilise existing funds to invest in property, for example:-

1. Create a Holding Company (group) structure.
2. Loan from IT company to Property company (SPV)
3. Buy property within your IT company - not usually recommended.

These options assume you don't want to extract the Ltd funds personally and then buy the properties.

There is already a fair bit of info on this thread and elsewhere on the 'net but feel free to ask any specific questions you have.

I went with option 2. There are ways in which to deal with this loan eventually. My choice is to re-mortgage the property and pay back the loan so that I can eventually MVL the IT company.

One point to note RE "holding companies" is that, I think, one cannot claim ER upon MVL should that ever be required.

Can someone confirm?


PS: I'd go with option 2 as well.

[jamesbrown]

One point to note RE "holding companies" is that, I think, one cannot claim ER upon MVL should that ever be required.

Can someone confirm?


PS: I'd go with option 2 as well.

Yes, ER is available for trading companies not CIHCs. It's possible that you could have a property company that develops properties, rather than invests in the property sector, but most will be investment companies/CIHCs. I wouldn't worry about ER anyway; that will most likely be gone very soon. An increase in GGT is also being mooted if the recent press is to be believed and CGT is already 28% for property sales vs. 20% for other assets.

[ChimpMaster]

Yes, ER is available for trading companies not CIHCs. It's possible that you could have a property company that develops properties, rather than invests in the property sector, but most will be investment companies/CIHCs. I wouldn't worry about ER anyway; that will most likely be gone very soon. An increase in GGT is also being mooted if the recent press is to be believed and CGT is already 28% for property sales vs. 20% for other assets.

That's quite a bit of conjecture there.

Rumours abound on ER but I'm yet to hear anything on CGT being increased. I'd say that is unlikely.

Though one shouldn't plan their business or life around taxes, it's often hard not to because governments use taxation as a means to encourage or discourage specific activities. This in turn does make it incredibly unfair when they then change the rules while you're midway playing.

[jamesbrown]

That's quite a bit of conjecture there.

Rumours abound on ER but I'm yet to hear anything on CGT being increased. I'd say that is unlikely.

Though one shouldn't plan their business or life around taxes, it's often hard not to because governments use taxation as a means to encourage or discourage specific activities. This in turn does make it incredibly unfair when they then change the rules while you're midway playing.

Sure, like I said:

An increase in GGT is also being mooted if the recent press is to be believed

For example:

Prime Minister launches task force to talk tough on trade with Brussels as Brexit D-Day looms | Daily Mail Online

Instead, is understood a hike in Capital Gains Tax has been mooted by Treasury officials. Currently, the tax on the profit from the sale of second properties is set at 28 per cent, with tax on the profit on the sale of other capital assets set at 20 per cent.

Speculation, obviously.

But you need to bear in mind what has been ruled out. No increases in VAT, income tax or NI. Increases in fuel tax look unlikely. They have a lot of ambition with few sources of revenue. CGT looks like a good option, as far as tax rises. No coincidence, then, that ER is on the list.

Still, someone is always "midway". TBH, I'm surprised ER lasted this long.