Does your company own your house?

[bernhund]

I'm just curious as to whether your company owns your house or if you would even consider your company owning your house?
I met a guy some time back now who lived in a superb house in South London whose company owned it. He couldn't understand why anyone who has a company would want to own their house personally. Instead of paying tax, he spends it on the house legitimately. He wasn't bothered by capital gains either. Can you see the benefit or problems?

[Steffan]

bernhund said:

I'm just curious as to whether your company owns your house or if you would even consider your company owning your house?
I met a guy some time back now who lived in a superb house in South London whose company owned it. He couldn't understand why anyone who has a company would want to own their house personally. Instead of paying tax, he spends it on the house legitimately. He wasn't bothered by capital gains either. Can you see the benefit or problems?

Depends on the structure he has used and the methods he employs. He sounds like an unusual character to me. Without the full details of those matters it is difficult to comment. It is certainly not uncommon in the London market.

[bernhund]

I know for sure he develops property, so no doubt that helps. He lives in a very comfortable way.

[Steffan]

bernhund said:

I know for sure he develops property, so no doubt that helps. He lives in a very comfortable way.

Not a route available to many buyers which requires a real understanding of the risks and benefits to be workable and secure. But not uncommon with property developers.

[Pit Pony]

He surely must pay tax on the 'benefit' of living in a free house?

I'm sure Eric will explain, but IF I was doing something like that, I certainly wouldn't discuss it with anyone, apart from my accountant.

[bernhund]

Pit Pony said:

He surely must pay tax on the 'benefit' of living in a free house?

I'm sure Eric will explain, but IF I was doing something like that, I certainly wouldn't discuss it with anyone, apart from my accountant.

He didn't go into great detail, but made it quite clear that financially he was way better off. He didn't disclose the finer details as that no doubt was private.

[NorthDave]

I know of one high end house builder who seems to have two streams for work - building houses for a specific customer and developing on spec. I'm pretty sure he lives in the speculative ones for at least 6 months to avoid capital gains tax. These are multi million pound houses so I guess the saving is significant.

I also know of a chap with a trust which owns his home (and a bucket load of other property).

Most of our clients in London (who are mainly foreign) by through a company of some description.

Seems to me like the rich get richer and avoid taxes whilst the middle guy takes everything on the chin!

[trickywoo]

Depending on company structure the main issue will be if the company gets into difficulty the house could potentially go with it.

Eggs in one basket.

[Eric Mc]

bernhund said:

He didn't go into great detail, but made it quite clear that financially he was way better off. He didn't disclose the finer details as that no doubt was private.

For the vast bulk of ordinary people, living in a house owned by a limited company would be a completely dumb thing to do.

One of the greatest perks of the UK tax system is that one's principle private residence is completely free of any sort of taxation on disposal (excluding Stamp Duty Land Tax). If a corporate entity owns the property, that massive exemption is lost.

Also, as some else has pointed out, if a business provides a house to a director or employee, then the employee will be taxed on the annual value of the rent free perk he is getting under the PAYE Benefit in Kind rules.
The only way out of that would be for the occupier (i.e. the director) to pay the company a commercial rent for the property. Of course, the company will pay Corporation tax on the profit from those rents.

Having a company owned property CAN be beneficial in restricted circumstances - usually when either the director and/or the company are non-UK resident for tax purposes.

HMRC have been looking very closely at these sorts of arrangements of late.

If this chap is in the property development business, I would expect that he might be being economical with the truth in disclosing to HMRC which properties owned by the company are genuine "trading stock" and which is a property in which he is actually living.

[bernhund]

No doubt it will catch him up in the end,which I suspect he knows. But until then he is living very well.
I'd rather sleep at night!

[Pit Pony]

bernhund said:

No doubt it will catch him up in the end,which I suspect he knows. But until then he is living very well.
I'd rather sleep at night!

Yep.

[Eleven]

bernhund said:

I'm just curious as to whether your company owns your house or if you would even consider your company owning your house?
I met a guy some time back now who lived in a superb house in South London whose company owned it. He couldn't understand why anyone who has a company would want to own their house personally. Instead of paying tax, he spends it on the house legitimately. He wasn't bothered by capital gains either. Can you see the benefit or problems?

FTEA I would think his property would also be subject to ATED (Annual Tax on Enveloped Dwellings) which is as follows:

More than £2 million but not more than £5 million

£15,400


More than £5 million but not more than £10 million

£35,900


More than £10 million but not more than £20 million

£71,850


More than £20 million

£143,750

[Steffan]

As Eric Mc has said this is a very unusual approach. As he advised the IR are particularly concerned with such an approach. It is in my view a mistake to attract the attentions of the IR because once roused they have very very long memories. Although there are possiblevtheoretical benefits I think in reality this is much more trouble than it is worth. Better by far to keep tax affairs simple and correct. A lot less bother. A much simpler approach?