BTL business. Starting capital. BTL business. Starting capital.
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  1. #1

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    Default BTL business. Starting capital.

    Hi all,

    I know there are some BTL people here. Few questions.

    I will be opening BTL LTD.

    What is the best way to get my personal money in it?
    Shares? Shares classes? Director's loan? Just loan?
    This money will be used to buy properties in LTD's name.


    I also have 2 BTL properties now, which I want to transfer into the BTL LTD, to avoid 40% tax on the rent income when I become permie.

    What is the best way for that?
    Donate them to LTD? Sell them at market value to LTD (for the money I already paid into LTD)? Sell them for £1 to LTD? Latter 2 will involve stamp duty.

    I guess if I donate or sell for £1 (if allowed) one day if I want to sell them from the company I will have to pay corp tax on the profit from the sale which will effectively 100% profit. Provided I have paid tax on the money I purchased the properties I dont want to pay corp tax on 100% of the sale price.

    What is your view on that? Or recommend a property business accountant/advisor.

    P.S. My accountant is an IT accounts specialist so no clue.

  2. #2

    Contractor Among Contractors

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    My thoughts are, since you will need an accountant that knows what they are doing re property renting, why not get another accountant or switch accountancy companies to one that does know what they are doing?

    That would be my first step.
    You above all people should know probabilisitic analysis is a stochastic process of independent of deterministic variables subject to constant change....

  3. #3

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    have you extracted all the money from your contractor company yet?
    If not you could just change that company to a BTL one.

    I'd put the initial money in as capital.
    A director loan makes sense if you think you'll extract the money sooner rather than later. It has no real tax advantage though as you'd only pay CGT on an actual gain.

    As for normal loan. Who's gonna lend your new company any money? Nobody unless you guarantee it personally.
    If you use your current LTD you can get a BBL though.

    Sell the properties to the LTD at a 'fair' market price. You might have some CGT to pay.
    If you got really fancy you could even circulate the money you get from the sale back into the LTD to buy more properties.
    You do need a specialist accountant though. So find one.
    See You Next Tuesday

  4. #4

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    First step. Get an accountant.
    Second step. Spend time asking these questions. They will likely know about other stuff you didn't even think to ask as well. Worth every penny.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  5. #5

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    By saying things like "gift" or sell for a nominal £1 to your LTD I can only assume you've not done even the tiniest amount of research.

  6. #6

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    Quote Originally Posted by TheGreenBastard View Post
    By saying things like "gift" or sell for a nominal £1 to your LTD I can only assume you've not done even the tiniest amount of research.
    You can do this, but only if you click your heels together three times whilst crossing your fingers. This is the advice I got from an anonymous internet forum once.
    You above all people should know probabilisitic analysis is a stochastic process of independent of deterministic variables subject to constant change....

  7. #7

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    I'm smell strong London program manager energy here... like Lynx Africa during Freshers Week strong.
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  8. #8

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    Quote Originally Posted by anim View Post
    Hi all,

    I know there are some BTL people here. Few questions.
    I will be opening BTL LTD. What is the best way to get my personal money in it?
    Shares? Shares classes? Director's loan? Just loan?
    This money will be used to buy properties in LTD's name.

    I also have 2 BTL properties now, which I want to transfer into the BTL LTD, to avoid 40% tax on the rent income when I become permie.
    What is the best way for that?
    Donate them to LTD? Sell them at market value to LTD (for the money I already paid into LTD)? Sell them for £1 to LTD? Latter 2 will involve stamp duty.

    I guess if I donate or sell for £1 (if allowed) one day if I want to sell them from the company I will have to pay corp tax on the profit from the sale which will effectively 100% profit. Provided I have paid tax on the money I purchased the properties I dont want to pay corp tax on 100% of the sale price.
    I would not open another LtdCo; as someone else has said I'd just reclass the existing LtdCo from the IT Consultant SIC to one of Property Rental.

    As for transferring the two existing rentals into said LtdCo, for the cost of the stamp duty, they can be shifted in name to this same LtdCo. I don't believe it is legal to sell a house at below market value, bloody sure there would be some tax dodge at work here.

    If after this, your Rental LtdCo is still short of funds, I'd make a loan from Director to LtdCo. And take it back out through time.

  9. #9

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    The reason behind opening another LTD for BTL only is that come IR35 in 2021, like most of you, I want to close the IT contractor LTD.

    Even more so if I get an offer with the same client via umbrella. They will not accept LTDs and will not issue IR35 determination.
    You've heard it before...better wind up than sorry.

    If I dont continue with the same client then yes, I might re-class the IT LTD to new SIC.

    When I said 'just loan' I mean I might not be a director, (wife will 100% be one) but just an employee (on zero hour contract as a second job). So lending my LTD my own money.

    Existing properties: If sold to LTD, stamp duty is payable, which is a few £k.
    I am sure one can gift/donate properties to LTD. That should not be a problem. Problem is if the LTD sells any of there properties at some point. My understanding is that the whole sale income will be corp. taxed because it will be regarded as 100% profit.

    So 2 scenarios here:

    a property of now £100k (bought for £90 personal) (sold for 110k in 5 years by LTD).
    - gifted - 19% corp tax on £110k is owed. ~ £21k
    - sold to LTD - stamp duty = £3.5k, no personal CGT. Plus 19% corp tax on £10k. ~£5.4k

    Seems like a no brainer, but can anyone validate the cases above?

  10. #10

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    Quote Originally Posted by Lance View Post

    I'd put the initial money in as capital.
    A director loan makes sense if you think you'll extract the money sooner rather than later. It has no real tax advantage though as you'd only pay CGT on an actual gain.
    Explain please.

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