Holiday let through business?
Discussion
Hello,
Wondering whether anybody has experience running a holiday let through a Ltd company?
In spare time I 'operate' a family company which owns and collects rent from a small office complex. Without any need to take capital from the business, it has accumulated significant cash reserves. Whilst my generation are unlikely to need additional support from the company, I do want to keep growing the company for the benefit of future generations.
Whilst not keen on the prospect of buy to let, I quite like the idea of a holiday let in a seaside hot spot (2hrs away). Management would be left to a local agent. Similar properties where I'm looking tend to be occupied for 120-140 days per year. Given the relative proximity, family members would occasionally use it as a weekend retreat when vacant (not so appealing with an office site!).
I've started with basic research to see what constitutes a holiday let and understand tax treatment, but curious whether anybody does similar, and how much 'work' it entails in real life? Does it make any profit after fees?
Many thanks!
onedsla
Wondering whether anybody has experience running a holiday let through a Ltd company?
In spare time I 'operate' a family company which owns and collects rent from a small office complex. Without any need to take capital from the business, it has accumulated significant cash reserves. Whilst my generation are unlikely to need additional support from the company, I do want to keep growing the company for the benefit of future generations.
Whilst not keen on the prospect of buy to let, I quite like the idea of a holiday let in a seaside hot spot (2hrs away). Management would be left to a local agent. Similar properties where I'm looking tend to be occupied for 120-140 days per year. Given the relative proximity, family members would occasionally use it as a weekend retreat when vacant (not so appealing with an office site!).
I've started with basic research to see what constitutes a holiday let and understand tax treatment, but curious whether anybody does similar, and how much 'work' it entails in real life? Does it make any profit after fees?
Many thanks!
onedsla
Hi Eric,
Thanks for responding. I've read and learned from many of your posts and really appreciate your contribution to the forum over the years.
However not clear on your logic with this one. From what I've read, qualifying holiday lets are indeed much more like a business - such as being subject to business rates rather than council tax. We're in agreement here, but why do you conclude that this makes it better off outside a company?
The main disadvantage I saw of buying inside a company wrapper was that we'd have to charge VAT (company is registered) which would be a pain. The potential workaround of creating a 'daughter company' would cause more work, which I'm trying to avoid.
Thanks for responding. I've read and learned from many of your posts and really appreciate your contribution to the forum over the years.
However not clear on your logic with this one. From what I've read, qualifying holiday lets are indeed much more like a business - such as being subject to business rates rather than council tax. We're in agreement here, but why do you conclude that this makes it better off outside a company?
The main disadvantage I saw of buying inside a company wrapper was that we'd have to charge VAT (company is registered) which would be a pain. The potential workaround of creating a 'daughter company' would cause more work, which I'm trying to avoid.
Is the holiday let profitable or does it generate losses?
Holiday Home Losses can only be offset against future holiday home losses - so you would have to segregate the losses in your limited company activities from the other trading activity profits or losses.
Holiday Home Losses can only be offset against future holiday home losses - so you would have to segregate the losses in your limited company activities from the other trading activity profits or losses.
Edited by Eric Mc on Thursday 30th July 17:34
Hi Eric,
Thanks again for the response.
The holiday let is only a thought at present. I'd anticipate that higher than usual first year costs would create a reasonable loss, but it would generate a small profit (£10 - 20k?) thereon. There'd also be potential for capital gain.
Having to ring fence that loss against the holiday let would be annoying. Think you've put me off the idea. Would a 'traditional' buy to let held by the company be any different?
Thanks again for the response.
The holiday let is only a thought at present. I'd anticipate that higher than usual first year costs would create a reasonable loss, but it would generate a small profit (£10 - 20k?) thereon. There'd also be potential for capital gain.
Having to ring fence that loss against the holiday let would be annoying. Think you've put me off the idea. Would a 'traditional' buy to let held by the company be any different?
Normally, I would always have advised against "buy to lets" being incorporated into trading limited companies. However, the recent announcements of restrictions on loan interest relief for buy to lets has perhaps swung the pendulum away from personal buy to lets and perhaps towards corporate buy to lets.
There are still lots of issues regarding having rental properties in limited companies which need to be addressed and fully understood by anybody who intends to go down that route.
There are still lots of issues regarding having rental properties in limited companies which need to be addressed and fully understood by anybody who intends to go down that route.
Interseting to see your response,
We have had holiday lets for around 10years, and are a Limited company - was advised to go down that route by our accountant. we do make a small profit though most years and the Ltd Co is purely for the holiday lets.
Maybe I should check that we need an update on advice?
We have had holiday lets for around 10years, and are a Limited company - was advised to go down that route by our accountant. we do make a small profit though most years and the Ltd Co is purely for the holiday lets.
Maybe I should check that we need an update on advice?
I think holiday lets are probably better suited to a limited company than a straightforward buy to let. The tax rules are different for the two different types of activities with holiday lets being treated closer to (but not exactly the same) as a trading activity. Buy to lets are considered more of an investment activity.
Tax rules are always changing so what would have been considered a good tax planning point in 2005 may not be so good in 2015.
Tax rules are always changing so what would have been considered a good tax planning point in 2005 may not be so good in 2015.
Gassing Station | Business | Top of Page | What's New | My Stuff