Ltd Co buying building plot for home
Discussion
I started a similar thread in Homes gardens & DIY but it may be more suited to here.
Has anyone any experience of doing something similar to the following?
1. Ltd Co (which I own) buys a building plot - it has the funds to do this.
2. I personally lease the land off the Ltd Co and finance building a house on it whilst living in my current house. May have to borrow some money for this.
3. I sell my current house and use the proceeds to buy the land off the Ltd Co at market rate (which is hopefully not much more than current cost as it already has full planning)
It all seems feasible to me; obviously I need to check with my accountant will HMRC frown on this?
Has anyone any experience of doing something similar to the following?
1. Ltd Co (which I own) buys a building plot - it has the funds to do this.
2. I personally lease the land off the Ltd Co and finance building a house on it whilst living in my current house. May have to borrow some money for this.
3. I sell my current house and use the proceeds to buy the land off the Ltd Co at market rate (which is hopefully not much more than current cost as it already has full planning)
It all seems feasible to me; obviously I need to check with my accountant will HMRC frown on this?
Countdown said:
Is there a reason wh6y you're not paying yourself a dividend and then using that to buy the land/finance the house build?
Just because by doing that I'd have to pay tax on dividends for both the plot cost and the build cost which would be too much over a relatively short duration. Its also not as tax efficient a way of using funds from selling my current house.mfmman said:
On a domestic/individual level would a lender lend funds to build on a plot owned by another?
What happens if something horrifically unforseen happens and your limited company goes bust?
Its a consideration but I'm not asking a lender to lend funds - if required I could raise cash towards the build cost by remortgaging my current house.What happens if something horrifically unforseen happens and your limited company goes bust?
Sounds overcomplicated.
If you change your year-end (or have just started your new year by luck), you can borrow the money for up to 21 months with no tax consequences other than owing the company interest at 2.25%. You'll need to make sure you attend to the company secretarial matter correctly as well.
If you change your year-end (or have just started your new year by luck), you can borrow the money for up to 21 months with no tax consequences other than owing the company interest at 2.25%. You'll need to make sure you attend to the company secretarial matter correctly as well.
MaxFromage said:
Sounds overcomplicated.
If you change your year-end (or have just started your new year by luck), you can borrow the money for up to 21 months with no tax consequences other than owing the company interest at 2.25%. You'll need to make sure you attend to the company secretarial matter correctly as well.
Ok - I didn't realise you had so long. Unfortunately the year end falls at the worst time possible for this but it changing it might work.If you change your year-end (or have just started your new year by luck), you can borrow the money for up to 21 months with no tax consequences other than owing the company interest at 2.25%. You'll need to make sure you attend to the company secretarial matter correctly as well.
Tafford said:
2. I personally lease the land off the Ltd Co and finance building a house on it whilst living in my current house.
3. I sell my current house and use the proceeds to buy the land off the Ltd Co at market rate (which is hopefully not much more than current cost as it already has full planning)
It all seems feasible to me
It's nonsense.3. I sell my current house and use the proceeds to buy the land off the Ltd Co at market rate (which is hopefully not much more than current cost as it already has full planning)
It all seems feasible to me
When the company sells its land it sells it with a house on it, not as an empty plot. No way can you pay "plot" price for a "plot with house on it" and pretend the plot price is the market value.
When the lease is brought to an end the questions of What?", "Why?" and "How much?" obviously arise.
Expect trouble. Or get some competent professional advisers.
rockin said:
It's nonsense.
When the company sells its land it sells it with a house on it, not as an empty plot. No way can you pay "plot" price for a "plot with house on it" and pretend the plot price is the market value.
The company wouldn't own the house though - I would. Surely it's just a leasehold house which happens to be on land owned by the company. What would have increased the value of the land?When the company sells its land it sells it with a house on it, not as an empty plot. No way can you pay "plot" price for a "plot with house on it" and pretend the plot price is the market value.
Tafford said:
MaxFromage said:
Sounds overcomplicated.
If you change your year-end (or have just started your new year by luck), you can borrow the money for up to 21 months with no tax consequences other than owing the company interest at 2.25%. You'll need to make sure you attend to the company secretarial matter correctly as well.
Ok - I didn't realise you had so long. Unfortunately the year end falls at the worst time possible for this but it changing it might work.If you change your year-end (or have just started your new year by luck), you can borrow the money for up to 21 months with no tax consequences other than owing the company interest at 2.25%. You'll need to make sure you attend to the company secretarial matter correctly as well.
Tafford said:
rockin said:
It's nonsense.
When the company sells its land it sells it with a house on it, not as an empty plot. No way can you pay "plot" price for a "plot with house on it" and pretend the plot price is the market value.
The company wouldn't own the house though - I would. Surely it's just a leasehold house which happens to be on land owned by the company. What would have increased the value of the land?When the company sells its land it sells it with a house on it, not as an empty plot. No way can you pay "plot" price for a "plot with house on it" and pretend the plot price is the market value.
By using the company surely this becomes a commercial enterprise and the construction of the property will increase the value of the land. You can’t just ignore that “profit” upon sale.
I am no expert by any stretch but it looks like the property could be transferred from the ltd company to a director via a distribution in specie (my google foo might be miles out!).
If no profit was ever made then no tax would be payable; however as this is a deliberate act it would appear to be tax evasion in my eyes.
Perhaps it could be structured to a least demonstrate a reasonable return to the ltd company that also minimises the cost to you.
If no profit was ever made then no tax would be payable; however as this is a deliberate act it would appear to be tax evasion in my eyes.
Perhaps it could be structured to a least demonstrate a reasonable return to the ltd company that also minimises the cost to you.
The tenant (you) has a lease.
The tenant spends £200k building a house. Why? Presumably because it's a 100+ year lease and the tenant will get value out of the house.
The lease is then surrendered to the landlord. Why? And how much compensation does the tenant get paid for the £200k he spent building the house? Answer = at least £200k
So the company now has an investment of £300k. £100k in the land and £200k in the building.
Why would the company sell £300k of land and building for £100k? It wouldn't.
The tenant spends £200k building a house. Why? Presumably because it's a 100+ year lease and the tenant will get value out of the house.
The lease is then surrendered to the landlord. Why? And how much compensation does the tenant get paid for the £200k he spent building the house? Answer = at least £200k
So the company now has an investment of £300k. £100k in the land and £200k in the building.
Why would the company sell £300k of land and building for £100k? It wouldn't.
Tafford said:
That makes sense - I would intend there to be a lease payable from me to company with the company making profit anyway.
Not here to repeat what I said on the other thread, just to clarify what you mean by lease. You seem to switch between talking about leasing the land whilst you build on it, leasing it once it's built and leasehold. You seem to think (unless I'm misreading this which is quite possible!) that if you built the house personally that you would 'own' the house whilst the propco would retain freehold ownership of the land. This isn't correct.
In your £100k/£200k/£300k scenario, the freehold owning propco would now own a £300k house after you've spent £200k building the house on its land.
No problem with the propco renting the property to you at a market rent if you wanted to live in it.
Likewise in your £100k/£200k/£300k scenario, the freehold/leasehold would still probably be worth the original £100k the propco paid for it, but it would need to independently valued when you acquired it (connected party). This would be different if the completed house was worth £500k for the reasons I mentioned on the other thread.
In your current thinking, if you'd personally spent £200k building the house on the propco's land then got run over by a bus, who do you think owns the house?
ETA As per other thread. Propco buys the freehold. Grants a licence for you to build a house on it on the basis (sale agreement) that you will acquire the freehold once it's completed (or at an agreed time thereafter). In your £100k/£200k/£300k scenario it is unlikely you will have a problem buy the plot for the original £100k. The problem (tax liability) arises if the end value exceeds the costs.
Edited by ben5575 on Tuesday 23 February 23:05
db10 said:
Jesus, how many stamp duty charges are you triggering with all these transfers ??
That was my thought. Once the house is built the SDLT will be on the built value not the land value, further even if its bought from the Ltd co at a reduced price the SDLT is applied on the market valueGassing Station | Finance | Top of Page | What's New | My Stuff