Property renovation as 'family' business...
Discussion
Folks,
My mum is likely to come into some money soon, likely to be in the region of 150k-200k
Whilst her remaining mortgage is peanuts, she is keen to try to grow the capital. She is also keen for some of the profit to gently pass to me to assist with current aspirations of moving to the country, etc. which is nice.
We have renovated a few houses in the past quite successfully, and are keen to do the same. She has previous experience of estate agency, and I have a good knowledge of the local market in Bristol. There are a few auctions around with good stock in areas with a clear chance of some profit given light refurb. I'm good with the basic stuff/landscaping and know enough trades for the big stuff.
What's the most tax-efficient way of doing this? I'm likely to be doing this as an aside to my day job, which brings me quite close to the higher rate threshold.
Would a limited company be the way to go? Wondering also how this would go with taking money out of the business as we go.
My mum is likely to come into some money soon, likely to be in the region of 150k-200k
Whilst her remaining mortgage is peanuts, she is keen to try to grow the capital. She is also keen for some of the profit to gently pass to me to assist with current aspirations of moving to the country, etc. which is nice.
We have renovated a few houses in the past quite successfully, and are keen to do the same. She has previous experience of estate agency, and I have a good knowledge of the local market in Bristol. There are a few auctions around with good stock in areas with a clear chance of some profit given light refurb. I'm good with the basic stuff/landscaping and know enough trades for the big stuff.
What's the most tax-efficient way of doing this? I'm likely to be doing this as an aside to my day job, which brings me quite close to the higher rate threshold.
Would a limited company be the way to go? Wondering also how this would go with taking money out of the business as we go.
It really depends on how formal or informal you want to do things.
Fully formal/proper = Limited Company, Mum as Owner/CEO, you as employee/minority shareholder/co-owner (depending on how much equity you put in)
Informal = mum as sole trader/Ltd Co. You help out on an informal basis. Mum gifts you money / shares in the firm as a thank you.
Hope that makes sense
. FWIW my family all seem to specialise in different trades. So we'll do work for each other but rarely pay cash (if that makes sense). Same applies to borrowing/lending money.
Fully formal/proper = Limited Company, Mum as Owner/CEO, you as employee/minority shareholder/co-owner (depending on how much equity you put in)
Informal = mum as sole trader/Ltd Co. You help out on an informal basis. Mum gifts you money / shares in the firm as a thank you.
Hope that makes sense
. FWIW my family all seem to specialise in different trades. So we'll do work for each other but rarely pay cash (if that makes sense). Same applies to borrowing/lending money.WindsorRob said:
Bear in mind that the biggest tax advantage you could get here is by using the properties being developed as your main residence. No cap gains on that but I guess it depends on whether you have another house.
That's an extremely good point. One which would need some thinking around. I would be prepared to live in the houses as they are renovated, no massive issue with selling my flat however I would not be the majority contributor. Or, financially, much of a contributor at all so I suppose it wouldn't work.
The old dear will be remaining in her current residence... Not sure being uprooted to live in a building site in the city would please her!
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