Buying a holiday property with your company
Discussion
Does anyone kknow what the tax implications of buying an 'investment' property through your company.
1) If you let your staff use it- is that a taxable benefit?
2)Same if you use it yourself?
3) If you wanted to subsequently buy it personally from the company, would HMRC be likely to investigate whether a 'fair price' had been paid.
Thanks
1) If you let your staff use it- is that a taxable benefit?
2)Same if you use it yourself?
3) If you wanted to subsequently buy it personally from the company, would HMRC be likely to investigate whether a 'fair price' had been paid.
Thanks
blindswelledrat said:
Does anyone kknow what the tax implications of buying an 'investment' property through your company.
1) If you let your staff use it- is that a taxable benefit?
2)Same if you use it yourself?
3) If you wanted to subsequently buy it personally from the company, would HMRC be likely to investigate whether a 'fair price' had been paid.
Thanks
1. Yes1) If you let your staff use it- is that a taxable benefit?
2)Same if you use it yourself?
3) If you wanted to subsequently buy it personally from the company, would HMRC be likely to investigate whether a 'fair price' had been paid.
Thanks
2. Yes
3. Yes
If you then sold to yourself, you'd also be effectively be paying legal fees and stamp duty twice too, so surely that wouldn't be economic.
Any particular reason you want to buy in the company and not personally?
I dont neccesarily, Im just mulling over pie-in-the sky ideas.
The obvious sense to it is that repayments would be paid at scource, i.e. a significant tax saving.
It would be abroad, but I hadnt considered stamp duties.
Although you answered 'yes' to the three, if you said it was a dormant investment property, or showed some rental income but denied use by yourself, would they realistically ever follow that up and investigate its truth?
Realistically the difficulty in them proving it would outweigh any xollectible tax on the issue
The obvious sense to it is that repayments would be paid at scource, i.e. a significant tax saving.
It would be abroad, but I hadnt considered stamp duties.
Although you answered 'yes' to the three, if you said it was a dormant investment property, or showed some rental income but denied use by yourself, would they realistically ever follow that up and investigate its truth?
Realistically the difficulty in them proving it would outweigh any xollectible tax on the issue
If a company's sole income derives from an asset, it becomes an "investment" company and not a "trading" company. It straight away loses the advantages of the lower Small Company Corporation Tax rates plus sopme of the dispensations for "disclosure" under company law.
It is also required that annual revaluations of the asset are carried out and the results of the revaluations disclosed in the company statutory accounts.
If directors or employees make personal use of the company asset, they will be liable to a Benefit in Kind charge on the sue of the asset - unless they pay full market rates for use of the asset.
Obviously, money paid to the compoany for use of the assetr is company income and will be subject to Corporartion Tax.
Failute to disclose the correct situation regarding the asset and its use is tax fraud and will be punished accordingly. Failure to declare a Benefit in Kind is also fraudulent and subject to fairly high penalties.
It is also required that annual revaluations of the asset are carried out and the results of the revaluations disclosed in the company statutory accounts.
If directors or employees make personal use of the company asset, they will be liable to a Benefit in Kind charge on the sue of the asset - unless they pay full market rates for use of the asset.
Obviously, money paid to the compoany for use of the assetr is company income and will be subject to Corporartion Tax.
Failute to disclose the correct situation regarding the asset and its use is tax fraud and will be punished accordingly. Failure to declare a Benefit in Kind is also fraudulent and subject to fairly high penalties.
The legal responsibility for declaring what the asset is used for is totally on the shoulders of the directors. Failure to disclose its actual useage is a criminal offence. Planning in advance to fail to disclose properly is conspiracy to defraud and is also a criminal offence.
It is highly likely that your company has an accountant. Your accountant is LEGALLY required to report to the Serious and Organised Crime Authority (SOCA) any of his/her clients of whom he is SUSPICIOUS might be comitting a criminal offence.
This places you in a multiple risk environment.
The Revenue may query the property as a matter of course.
Your accountant may report the "criminal" aspect of failing to disclose properly.
I have certainly come across situations where the use of a "business" asset has been queried by the Revenue - in one case it was a yacht.
So, whatever your course of action, you must ensure that you have a watertight story proving the legitimate useage of the asset for business purposes backed up by underlying paperwork and documentary evidence.
It is highly likely that your company has an accountant. Your accountant is LEGALLY required to report to the Serious and Organised Crime Authority (SOCA) any of his/her clients of whom he is SUSPICIOUS might be comitting a criminal offence.
This places you in a multiple risk environment.
The Revenue may query the property as a matter of course.
Your accountant may report the "criminal" aspect of failing to disclose properly.
I have certainly come across situations where the use of a "business" asset has been queried by the Revenue - in one case it was a yacht.
So, whatever your course of action, you must ensure that you have a watertight story proving the legitimate useage of the asset for business purposes backed up by underlying paperwork and documentary evidence.
Edited by Eric Mc on Friday 11th January 13:49
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