Buying an office through own limited company?
Discussion
Hi all,
I was keen to see if anyone had any advice they can pass on with something I am just beginning to explore.
I am a Director of my own limited company (powerfully built director etc, standard PH
) along with my business partner. We are a 2 man band without any particular plans to grow the business as it is relatively successful as is, without the headache and stress of managing a team. Our plan is to generate the maximum income we can, and make our money work for us.
As part of this strategy we have begun to explore whether we can buy an office. We currently rent a serviced office in town (Manchester) and spend circa £1200 a month on rent/landline/broadband, plus another say £250 a month on car parking. So over the last 3 years that's £52k ish that we have spent without seeing much back.
Is there a way our via our limited company we can buy, say a barn outside of the city, and convert it into an office and pay a mortgage instead of rent? Or buy a 2 story office building with a mortgage via the company, rent one story out to another firm and occupy the top floor ourselves for example?
I am sure this has been done, I'd be keen to get any insight from those with first hand experience to supplement the various bits of reading I am doing to find out more.
The idea of owning an office, potentially making money on any redevelopment/refurbishment of it, and it forming part of the retirement pot when it is paid off in 25 years time is quite appealing but I am sure there is more to it than that.
Many thanks in advance!
I was keen to see if anyone had any advice they can pass on with something I am just beginning to explore.
I am a Director of my own limited company (powerfully built director etc, standard PH
) along with my business partner. We are a 2 man band without any particular plans to grow the business as it is relatively successful as is, without the headache and stress of managing a team. Our plan is to generate the maximum income we can, and make our money work for us. As part of this strategy we have begun to explore whether we can buy an office. We currently rent a serviced office in town (Manchester) and spend circa £1200 a month on rent/landline/broadband, plus another say £250 a month on car parking. So over the last 3 years that's £52k ish that we have spent without seeing much back.
Is there a way our via our limited company we can buy, say a barn outside of the city, and convert it into an office and pay a mortgage instead of rent? Or buy a 2 story office building with a mortgage via the company, rent one story out to another firm and occupy the top floor ourselves for example?
I am sure this has been done, I'd be keen to get any insight from those with first hand experience to supplement the various bits of reading I am doing to find out more.
The idea of owning an office, potentially making money on any redevelopment/refurbishment of it, and it forming part of the retirement pot when it is paid off in 25 years time is quite appealing but I am sure there is more to it than that.
Many thanks in advance!
Also have a look at buying commercial property within a SIPP as you and your partner could put the property into a pension pot.
The SIPP can even have a mortgage (50%) I think and it can be split between the 2 of you. The pension can also do the maintenance and refurbishments.
Plus obviously you get the relief in the way into the pension wrapper.
Can make a very cost effective way of buying a commercial property.
Bob
This could make for a very cost
The SIPP can even have a mortgage (50%) I think and it can be split between the 2 of you. The pension can also do the maintenance and refurbishments.
Plus obviously you get the relief in the way into the pension wrapper.
Can make a very cost effective way of buying a commercial property.
Bob
This could make for a very cost
Be aware with the pension schemes there are cons as well as pros. Usually nor discovered until down the line.
You would have a lease to your business from the pension scheme. You would not legally be able to do anything which is not at 'market value'. So if you want to vary the terms, or move out and re-let - it might get restrictive. The example I always have was a chap who wanted to move offices. Values had fallen and he could not surrender his lease and re-let without paying a surrender premium.
My own view is property is great as a pension investment - but I'd think about not putting my own business into it.
You would have a lease to your business from the pension scheme. You would not legally be able to do anything which is not at 'market value'. So if you want to vary the terms, or move out and re-let - it might get restrictive. The example I always have was a chap who wanted to move offices. Values had fallen and he could not surrender his lease and re-let without paying a surrender premium.
My own view is property is great as a pension investment - but I'd think about not putting my own business into it.
We are a husband/wife limited company, who have bought three commercial units in the last three years, operating out of one and renting out the other two.
Normally VAT is not applicable on the purchase price of commercial property, but all three of ours had VAT applied under the "opt to tax" rule. If you are VAT registered or are charged VAT on the purchase make sure you research "opt to tax" thoroughly. It's not a problem but you must understand it.
It's a complicated area... but means that to reclaim the VAT we paid on the purchase price, we have to charge VAT on any rental income.
Complicated even more if a tenant is a charity and therefore VAT exempt.
Good luck.
Normally VAT is not applicable on the purchase price of commercial property, but all three of ours had VAT applied under the "opt to tax" rule. If you are VAT registered or are charged VAT on the purchase make sure you research "opt to tax" thoroughly. It's not a problem but you must understand it.
It's a complicated area... but means that to reclaim the VAT we paid on the purchase price, we have to charge VAT on any rental income.
Complicated even more if a tenant is a charity and therefore VAT exempt.
Good luck.
I was renting serviced offices for 3 years one day I realised how much my Ltd company had spent on rent.
So went out and bought an industrial unit myself, I now rent this back to my Ltd company.
I don't pay NI on the rent and it's not an asset of the company.
I am currently contributing into a sipp once there is enough in it I will sell the unit to my sipp for a tidy tax free profit and then the company will pay rent into my sipp.
Happy days.
So went out and bought an industrial unit myself, I now rent this back to my Ltd company.
I don't pay NI on the rent and it's not an asset of the company.
I am currently contributing into a sipp once there is enough in it I will sell the unit to my sipp for a tidy tax free profit and then the company will pay rent into my sipp.
Happy days.
Whistle said:
I was renting serviced offices for 3 years one day I realised how much my Ltd company had spent on rent.
So went out and bought an industrial unit myself, I now rent this back to my Ltd company.
I don't pay NI on the rent and it's not an asset of the company.
I am currently contributing into a sipp once there is enough in it I will sell the unit to my sipp for a tidy tax free profit and then the company will pay rent into my sipp.
Happy days.
How will the capital gain on the unit be tax free?So went out and bought an industrial unit myself, I now rent this back to my Ltd company.
I don't pay NI on the rent and it's not an asset of the company.
I am currently contributing into a sipp once there is enough in it I will sell the unit to my sipp for a tidy tax free profit and then the company will pay rent into my sipp.
Happy days.
fat80b said:
Also have a look at buying commercial property within a SIPP as you and your partner could put the property into a pension pot.
The SIPP can even have a mortgage (50%) I think and it can be split between the 2 of you. The pension can also do the maintenance and refurbishments.
Plus obviously you get the relief in the way into the pension wrapper.
Can make a very cost effective way of buying a commercial property.
Bob
This could make for a very cost
A SSAS is likely to be cheaper for two members.The SIPP can even have a mortgage (50%) I think and it can be split between the 2 of you. The pension can also do the maintenance and refurbishments.
Plus obviously you get the relief in the way into the pension wrapper.
Can make a very cost effective way of buying a commercial property.
Bob
This could make for a very cost
desolate said:
Whistle said:
I was renting serviced offices for 3 years one day I realised how much my Ltd company had spent on rent.
So went out and bought an industrial unit myself, I now rent this back to my Ltd company.
I don't pay NI on the rent and it's not an asset of the company.
I am currently contributing into a sipp once there is enough in it I will sell the unit to my sipp for a tidy tax free profit and then the company will pay rent into my sipp.
Happy days.
How will the capital gain on the unit be tax free?So went out and bought an industrial unit myself, I now rent this back to my Ltd company.
I don't pay NI on the rent and it's not an asset of the company.
I am currently contributing into a sipp once there is enough in it I will sell the unit to my sipp for a tidy tax free profit and then the company will pay rent into my sipp.
Happy days.
Whistle said:
I was renting serviced offices for 3 years one day I realised how much my Ltd company had spent on rent.
So went out and bought an industrial unit myself, I now rent this back to my Ltd company.
I don't pay NI on the rent and it's not an asset of the company.
I am currently contributing into a sipp once there is enough in it I will sell the unit to my sipp for a tidy tax free profit and then the company will pay rent into my sipp.
Happy days.
I would favour this approach. That way, should your business go bust, you retain an asset.So went out and bought an industrial unit myself, I now rent this back to my Ltd company.
I don't pay NI on the rent and it's not an asset of the company.
I am currently contributing into a sipp once there is enough in it I will sell the unit to my sipp for a tidy tax free profit and then the company will pay rent into my sipp.
Happy days.
Thank you for the replies chaps. All very useful info and plenty for me to explore further.
I hadn't realised the option of buying personally and renting it to the company - as mentioned a good way to protect the asset if anything happened to the company....
The SIPP option is interesting but I have a nagging doubt as to the lack of flexibility in terms of getting money back out. Say for example we bought somewhere, added significant value and 10 years down the line wanted to cash in - that cash is stuck in the SIPP but there may be other investment opportunities I'd like to make outside of the SIPP. In a similar way, I am tending to invest via my stocks and shares ISA as opposed to filling my pension every year (making a token contribution to the pension too) as I hope to retire before pension age. Although that is of course some way off. Plenty of food for thought.
And to the poster asking about whether my accountant can help - he isn't the most forthcoming when anything goes beyond the realms of bookkeeping/tax returns etc! I emailed him 2 days ago asking for more info (as he mentioned it when he last came to see us) and I am still waiting for a reply
Thanks again, some really helpful info here and heaps to look into further.
I hadn't realised the option of buying personally and renting it to the company - as mentioned a good way to protect the asset if anything happened to the company....
The SIPP option is interesting but I have a nagging doubt as to the lack of flexibility in terms of getting money back out. Say for example we bought somewhere, added significant value and 10 years down the line wanted to cash in - that cash is stuck in the SIPP but there may be other investment opportunities I'd like to make outside of the SIPP. In a similar way, I am tending to invest via my stocks and shares ISA as opposed to filling my pension every year (making a token contribution to the pension too) as I hope to retire before pension age. Although that is of course some way off. Plenty of food for thought.
And to the poster asking about whether my accountant can help - he isn't the most forthcoming when anything goes beyond the realms of bookkeeping/tax returns etc! I emailed him 2 days ago asking for more info (as he mentioned it when he last came to see us) and I am still waiting for a reply
Thanks again, some really helpful info here and heaps to look into further.
alpertonian said:
We are a husband/wife limited company, who have bought three commercial units in the last three years, operating out of one and renting out the other two.
Normally VAT is not applicable on the purchase price of commercial property, but all three of ours had VAT applied under the "opt to tax" rule. If you are VAT registered or are charged VAT on the purchase make sure you research "opt to tax" thoroughly. It's not a problem but you must understand it.
It's a complicated area... but means that to reclaim the VAT we paid on the purchase price, we have to charge VAT on any rental income.
Complicated even more if a tenant is a charity and therefore VAT exempt.
Good luck.
Thank you! Normally VAT is not applicable on the purchase price of commercial property, but all three of ours had VAT applied under the "opt to tax" rule. If you are VAT registered or are charged VAT on the purchase make sure you research "opt to tax" thoroughly. It's not a problem but you must understand it.
It's a complicated area... but means that to reclaim the VAT we paid on the purchase price, we have to charge VAT on any rental income.
Complicated even more if a tenant is a charity and therefore VAT exempt.
Good luck.
With the "special" 7.5% tax on dividends between £5,000 and the Higher Rate Tax band, extracting income out of the company by way of rent is now a worthwhile method to use.
Don't forget that if you do this you will need to return that rental income annually through the self assessment system and, if current plans continue, quarterly from 5 April 2019 through the Digital Tax system.
Don't forget that if you do this you will need to return that rental income annually through the self assessment system and, if current plans continue, quarterly from 5 April 2019 through the Digital Tax system.
si
800 said:
800 said: Thank you for the replies chaps. All very useful info and plenty for me to explore further.
I hadn't realised the option of buying personally and renting it to the company - as mentioned a good way to protect the asset if anything happened to the company....
The SIPP option is interesting but I have a nagging doubt as to the lack of flexibility in terms of getting money back out. Say for example we bought somewhere, added significant value and 10 years down the line wanted to cash in - that cash is stuck in the SIPP but there may be other investment opportunities I'd like to make outside of the SIPP. In a similar way, I am tending to invest via my stocks and shares ISA as opposed to filling my pension every year (making a token contribution to the pension too) as I hope to retire before pension age. Although that is of course some way off. Plenty of food for thought.
And to the poster asking about whether my accountant can help - he isn't the most forthcoming when anything goes beyond the realms of bookkeeping/tax returns etc! I emailed him 2 days ago asking for more info (as he mentioned it when he last came to see us) and I am still waiting for a reply
Thanks again, some really helpful info here and heaps to look into further.
Then I'd Google for a local tax expert then !!I hadn't realised the option of buying personally and renting it to the company - as mentioned a good way to protect the asset if anything happened to the company....
The SIPP option is interesting but I have a nagging doubt as to the lack of flexibility in terms of getting money back out. Say for example we bought somewhere, added significant value and 10 years down the line wanted to cash in - that cash is stuck in the SIPP but there may be other investment opportunities I'd like to make outside of the SIPP. In a similar way, I am tending to invest via my stocks and shares ISA as opposed to filling my pension every year (making a token contribution to the pension too) as I hope to retire before pension age. Although that is of course some way off. Plenty of food for thought.
And to the poster asking about whether my accountant can help - he isn't the most forthcoming when anything goes beyond the realms of bookkeeping/tax returns etc! I emailed him 2 days ago asking for more info (as he mentioned it when he last came to see us) and I am still waiting for a reply
Thanks again, some really helpful info here and heaps to look into further.
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