Selling property in a ltd company
Discussion
Hello all,
I'm a bit confused about the tax rules etc that apply if I was to sell a property that is in my ltd company (specifically set up for rental properties). Consider the following situation:
I put £150k into a company (as a directors loan) to buy a property outright which the company has received rent from for the last couple of years. If I sold that property for say £200k (ignoring the expenses associated with buying etc), I have made £50k capital gains (ignoring accumulated rents). As I understand it, I have to pay corporation tax on the £50k profit, so lets just say £10k.
So that leaves me with £190k sitting in the company, Can I withdraw the whole amount of money from the company without paying any additional taxes or do I repay my £150k directors loan and then take the £40k as either wages or dividends, thus attracting further tax? How does it work?
Pls can the PH gurus clarify what rules apply.
Many thanks....
I'm a bit confused about the tax rules etc that apply if I was to sell a property that is in my ltd company (specifically set up for rental properties). Consider the following situation:
I put £150k into a company (as a directors loan) to buy a property outright which the company has received rent from for the last couple of years. If I sold that property for say £200k (ignoring the expenses associated with buying etc), I have made £50k capital gains (ignoring accumulated rents). As I understand it, I have to pay corporation tax on the £50k profit, so lets just say £10k.
So that leaves me with £190k sitting in the company, Can I withdraw the whole amount of money from the company without paying any additional taxes or do I repay my £150k directors loan and then take the £40k as either wages or dividends, thus attracting further tax? How does it work?
Pls can the PH gurus clarify what rules apply.
Many thanks....
Are you intimating that the company already owes you some money in the form of a balance due to you on your Director's Loan Account? If that is the case, any cash generated by the disposal of the property can be extracted tax free from your company by treating any withdrawal of cash to you personally as a full or part repayment of the money the company already owes to you.
If the amount owed to you by the company is insufficient to absorb all the cash proceeds available from the property sale, the options are to leave the remaining proceeds in the company or extract it in the form of salary, dividends or a combination of both.
Obviously, with salaries there will be PAYE and NI (Employee's and Employer's) to take into account and with dividends there will be Income Tax only to take into account.
One other option is to wind the company up and take the money in the form of a Capital Gain on disposal of the company. Depending on a number of factors, the disposal of the company might be eligible for entrepreneur's relief but without knowing all the facts surrounding the history of the company it is not possible to be clear as to whether this is a viable option.
This is where speaking to your accountant is crucial.
If the amount owed to you by the company is insufficient to absorb all the cash proceeds available from the property sale, the options are to leave the remaining proceeds in the company or extract it in the form of salary, dividends or a combination of both.
Obviously, with salaries there will be PAYE and NI (Employee's and Employer's) to take into account and with dividends there will be Income Tax only to take into account.
One other option is to wind the company up and take the money in the form of a Capital Gain on disposal of the company. Depending on a number of factors, the disposal of the company might be eligible for entrepreneur's relief but without knowing all the facts surrounding the history of the company it is not possible to be clear as to whether this is a viable option.
This is where speaking to your accountant is crucial.
Eric Mc said:
Are you intimating that the company already owes you some money in the form of a balance due to you on your Director's Loan Account? If that is the case, any cash generated by the disposal of the property can be extracted tax free from your company by treating any withdrawal of cash to you personally as a full or part repayment of the money the company already owes to you.
If the amount owed to you by the company is insufficient to absorb all the cash proceeds available from the property sale, the options are to leave the remaining proceeds in the company or extract it in the form of salary, dividends or a combination of both
Thanks, thats exactly the info I was after.. much appreciatedIf the amount owed to you by the company is insufficient to absorb all the cash proceeds available from the property sale, the options are to leave the remaining proceeds in the company or extract it in the form of salary, dividends or a combination of both
JulianPH said:
Just another point, the company can pay the £40,000 into a pension/SIPP on your behalf with no income tax/NI deductions whatsoever and then you also do not have any corporation tax on this £40,000 profit either.
I haven't considered this so another good pointer...thanks :-)Gassing Station | Finance | Top of Page | What's New | My Stuff