Buying property via Ltd company...
Discussion
Company might change from being a trading company to an investment company - with a consequent jump in the Corporation Tax rates applicable to its profits
Rental income chargeable to Corporation Tax rather than Income Tax
Subsequent gains on disposal will be taxable through the company and will therefore not receive the annual Capital Gains Eax allowncw (currently £9,600 per person).
If a Capital Loss arises on disposal, the loss can only be offset against future Capital Gains in the company.
Ownership of the property will be linked to ownership of the company - which may not be desirable depending on your plans for the company.
If you live in it, you may be subject to the Benefit in Kind tax rules regarding provision of living accomodation by an employer.
If it is your main residence, as you don't personally own it, the property would not be eligible for the Main Residence CGT exemption.
Rental income chargeable to Corporation Tax rather than Income Tax
Subsequent gains on disposal will be taxable through the company and will therefore not receive the annual Capital Gains Eax allowncw (currently £9,600 per person).
If a Capital Loss arises on disposal, the loss can only be offset against future Capital Gains in the company.
Ownership of the property will be linked to ownership of the company - which may not be desirable depending on your plans for the company.
If you live in it, you may be subject to the Benefit in Kind tax rules regarding provision of living accomodation by an employer.
If it is your main residence, as you don't personally own it, the property would not be eligible for the Main Residence CGT exemption.
Edited by Eric Mc on Tuesday 18th November 13:18
Useful info as always Eric.
Eric Mc said:
Company might change from being a trading company to an investment company - with a consequent jump in the Corporation Tax rates applicable to its profits
What criteria/threshold governs whether it is a trading or investment company in this respect?Not an easy one to answer as there are no hard and fast criteria. I would say if over 50% of the turnover of the company was generated from investments rather than a trading activity, the Revenue would expect the small trading company status to be no longer relevant.
Property development companies are particularly vulnerable to do this. Their normal activity of buying land and property, developing it and selling it on is a normal, proper trade. However, if, as in the current economic climate, they decide to retain some of the property and start renting it out, they could fall foul of these rules - depending on how much rent was generated compared to their income from the selling of property.
Property development companies are particularly vulnerable to do this. Their normal activity of buying land and property, developing it and selling it on is a normal, proper trade. However, if, as in the current economic climate, they decide to retain some of the property and start renting it out, they could fall foul of these rules - depending on how much rent was generated compared to their income from the selling of property.
Edited by Eric Mc on Wednesday 19th November 16:51
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