Can I buy my main home via my limited company? Can I buy my main home via my limited company?
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  1. #1

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    Default Can I buy my main home via my limited company?

    Hi,
    I would like to know what the pros and cons are of buying a property under a company name, not as a property for rental income but as my main home. The plan is to use accumulated earnings of past years as a deposit and my future earning to pay for mortgage payments. This way, I will not have to pay that much dividends to pay for a mortgage, which would otherwise necessary if buying on my person. Smaller dividend means smaller personal income tax.

    In response to article Can I buy property via my limited company? your expert warned against buying a main home through a company but giving very little details why.

    It is a main home but we can legitimately look at it as buying company headquarters to use it for my business and even an IT company, like mine, can utilize real estate this way.

    Back to the article. Your expert laid down only two reasons:
    you could incur a benefit in kind unless you paid the commercial rent to your company
    any gain on selling the property would be subject to corporation tax

    1) you could incur a benefit in kind unless you paid the commercial rent to your company
    I am intending to pay some rent, though because I’m in charge, I would set the rent as low as possible. Ideally smaller than mortgage payments so company would incur loss – less tax to pay.
    In the worst case, I would end up withdrawing same dividends to cover my mortgage as I would with buying a house on my person. And that is the worst case scenario.

    2) any gain on selling the property would be subject to corporation tax
    OK, this is potentially a real bummer. Could I really lose more on CGT than I would have to pay as tax on dividends as hinted above?
    Two things to mitigate this problem:
    a) I would be selling to myself, ideally for the price I bought or not much over
    b) I can sell to myself when property market is down (in case HMRC would take market price as tax basis rather then nominal purchase price)
    Inflation can complicate this, as any future tax will be measured in inflated prices, potentially hiking up CGT considerably. I would be paying in equally deflated money however too, so it might not be so bad. My outlook of the property market is rather negative,. I assume it has peaked and it eventually would go down. At least in real price terms.*

    Positives:

    - Avoiding to pay dividend tax I would have to pay due to withdrawal of a large lump sum required as a deposit – a sum that would be withdrawn as a dividend or by liquidating the company.
    - Most likely saving on dividend tax because I would pay much smaller rent.

    Other considerations:
    Inheritance. In case of my death, who would inherit company shares and this way also the deeds to the house?

    Assumptions:
    I can keep my company for the rest of my life
    Small company upkeep costs when dormant, in case of switching to permanent employment, or taking a sabbatical or early retirement

    There is a risk that any of these assumption can change; HMRC can start taxing dormant companies, forcing me to sell. I understand there are the risks but they seem to be risks I am willing to bear.

  2. #2

    Double Godlike!

    MrMarkyMark is a fount of knowledge


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    TL;DR.

    Have you searched plenty of past threads on the subject.

    The main point running through them all is "don't bother".

    Without going into detail I believe you have some quite strange ideas of how things work, imo.

  3. #3

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    There is no CGT paid on your own main residence. The company would always own it. I think you're overthinking this a little too much.
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    You know what they say about assumptions!

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    Erm. The expert did not warn against it. He explicitly said with capitals not to so it.

    You definitely should NOT buy your main home through your company
    Why have you thought about all this guff after reading that? Legitimately look at it as buying company headquaters? Honestly? It's your home. End of story. Correct that mistake and the rest of the post is pointless.
    Last edited by northernladuk; 2nd August 2017 at 07:52.
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  5. #5

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    This thread should be in accounting/legal NOT General.
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    Quote Originally Posted by SueEllen View Post
    This thread should be in accounting/legal NOT General.
    Nope. Fantasy threads belong in General.
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  7. #7

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    Quote Originally Posted by Corey Lucas View Post
    Other considerations:
    Inheritance. In case of my death, who would inherit company shares and this way also the deeds to the house?
    Whoever you leave it to, or if you die intestate then whoever inherits under those rules.

    If you're worried about it, leave the shares in the company to another company - for a small fee, I'll let you use mine.
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    Well you seem a well adjusted, sane person. I think you should buy your house using your limited company.

    Let us know how you get on.

  9. #9

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    Quote Originally Posted by SueEllen View Post
    This thread should be in accounting/legal NOT General.
    I actually moved it there.

    Then changed my mind and returned it here.

  10. #10

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    Quote Originally Posted by cojak View Post
    I actually moved it there.

    Then changed my mind and returned it here.
    Yeah reasons been explained.
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