Buying a flat in contract location

[manclarky]

Afternoon,

I'm in the process of moving from a contract where i've been commuting from home every day to a contract where I will be living in a hotel monday to friday.

I expect to be paying about £100-£120 for 4 nights each week.

I was wondering what you lot thought about the financial pro's and con's of buying a flat in the City I'm moving to. There's some dubious 1-bed properties in the surrounding area for £30k (modernisation required).

Would it make sense to buy the flat in my company name and just bill all the modernisation costs through the company?
Then when I've finished my contract, the company could then rent the place out (plan B possibility?).

Or, should I take money out the company (enter 40% dividend rate) to fund the flat? If I did that, could I bill the company a nominal rent per night my company used it for it's employee?

All thoughts appreciated

[Fred Bloggs]

My immediate thought is that if you can buy any property around there for £30k then you are certainly going to be able to find much lower cost good quality accommodation for the 4 nights a week. Plus, myself, I would never consider buying property is such a low cost area unless it was to let out to students or DSS claimants.

[lje]

I wouldn't want to buy a flat which would rent out for a low amount afterwards - you could spend more time trying to manage your tenants than you'd like.

I have thought of doing this type of thing before in a more expensive area. My plan was to buy it personally and to rent it to my company for the going rate. As an individual you can allow the mortgage interest payment against rental income (plus lots of other things) before you consider the income for tax purposes - so it's another way of getting money out of your company. It's perfectly reasonable for your company to rent a flat for you when it asks you to work at a reasonably far away temporary site (as long as your whole family doesn't move in...).

I didn't take the contract in the end so didn't do it but I would if the situation warranted it.

[manclarky]

I wouldn't want to buy a flat which would rent out for a low amount afterwards

Yes, that makes sense - I know I couldn't be bothered with the hassle of tenants after, and you're right - for such a piddling amount, it would hardly be worth it.

thanks for your thoughts

[Dearnla]

If your company bought a flat, it would be buying an asset. If you lived in that flat, you would have to pay decent rent, else you'd get taxed and NI'd by HMRC for Benefit in Kind. Say, £100k flat at 20% BIK rate x your tax rate (20%?, 40%?) that's 4 to 8 grand a year....And then when you sell the flat your company pays tax on the profit...or loses on the loss.

I know my maths is suspect, but you get the idea why we haven't all thought of it - simple, HMRC thought up how to tax it long before!!

[northernladuk]

You could of course buy a mobile home or a caravan and set it up just outside London and live in that as some contractors have started to do.

London property prices forcing commuters to live under canvas | Money | The Guardian

[Greg@CapitalCity]

Usually its a bad idea to buy property through your trading company. Reasons include Capital Gains tax, IR35 risks, additional costs if/when you finish contracting and need to move the property out of the ownership of the company, and finding a bank that will give your company a mortgage.

Much better to buy personally, the rent the property to your business at a market rate.

[manclarky]

You could of course buy a mobile home or a caravan and set it up just outside London and live in that

It would be a long commute to Nottinghamshire each morning though!

[BolshieBastard]

An average 25 to 30 quid a night! Must be some tulipe hole at those prices. Each to their own I guess.

Best option if its a long term contract is to rent a gaff.

Done this a couple of times when I was working in the north east and it was far better than B&B. If you arent comfy in your diggs when working away, potentially you're always going to be unhappy and wanting to move to another contract.