Property Advise
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I have a good friend who bought a run down house during covid and got planning to extend/update including pool/gym area, etc. Its around 5000sqft in its current (dilapidated) state, and would be around 7500sqft upon completion.
Due to a number of bad choices/decisions, the project is currently shelved as the cost to build is significantly more than its worth upon completion, so he's left with options of;
a) sit on the land (circa 7 acres) and hope to get planning for multiple dwellings at some point
b) finish the development (which has currently been stopped pending a decision)
c) sell up in its current state which would be tricky as no bathrooms/kitchens currently
Option C will likely result in a loss of around £500-750k. Option B would be likely a similar number.
Its not a great situation to be in, but got me thinking that surely it would have some value in transferring the property into a limited company, completing the development that way (which allows VAT to be recovered, which saves some money, albeit it was only a 5% anyway due to being empty for quite a while), and then when he sells the property at the end for a loss, he's at least got a loss showing on his accounts which can be carried over for future years taxes ?
Am I being stupid here ? As said, its not a great situation, and losing 500-750k (even when your worth maybe 10-20m) isn't a great outcome so was just thinking if there were options available ?
He still invests in companies, and sits as N.E.D on a few boards, so has significant earnings still, so having a company with a significant loss against it would have a value itself, as would wipe out taxes owed from other earnings potentially, which reduces the loss somewhat.
Due to a number of bad choices/decisions, the project is currently shelved as the cost to build is significantly more than its worth upon completion, so he's left with options of;
a) sit on the land (circa 7 acres) and hope to get planning for multiple dwellings at some point
b) finish the development (which has currently been stopped pending a decision)
c) sell up in its current state which would be tricky as no bathrooms/kitchens currently
Option C will likely result in a loss of around £500-750k. Option B would be likely a similar number.
Its not a great situation to be in, but got me thinking that surely it would have some value in transferring the property into a limited company, completing the development that way (which allows VAT to be recovered, which saves some money, albeit it was only a 5% anyway due to being empty for quite a while), and then when he sells the property at the end for a loss, he's at least got a loss showing on his accounts which can be carried over for future years taxes ?
Am I being stupid here ? As said, its not a great situation, and losing 500-750k (even when your worth maybe 10-20m) isn't a great outcome so was just thinking if there were options available ?
He still invests in companies, and sits as N.E.D on a few boards, so has significant earnings still, so having a company with a significant loss against it would have a value itself, as would wipe out taxes owed from other earnings potentially, which reduces the loss somewhat.
Hobo said:
I have a good friend who bought a run down house during covid and got planning to extend/update including pool/gym area, etc. Its around 5000sqft in its current (dilapidated) state, and would be around 7500sqft upon completion.
Due to a number of bad choices/decisions, the project is currently shelved as the cost to build is significantly more than its worth upon completion, so he's left with options of;
a) sit on the land (circa 7 acres) and hope to get planning for multiple dwellings at some point
b) finish the development (which has currently been stopped pending a decision)
c) sell up in its current state which would be tricky as no bathrooms/kitchens currently
Option C will likely result in a loss of around £500-750k. Option B would be likely a similar number.
Its not a great situation to be in, but got me thinking that surely it would have some value in transferring the property into a limited company, completing the development that way (which allows VAT to be recovered, which saves some money, albeit it was only a 5% anyway due to being empty for quite a while), and then when he sells the property at the end for a loss, he's at least got a loss showing on his accounts which can be carried over for future years taxes ?
Am I being stupid here ? As said, its not a great situation, and losing 500-750k (even when your worth maybe 10-20m) isn't a great outcome so was just thinking if there were options available ?
He still invests in companies, and sits as N.E.D on a few boards, so has significant earnings still, so having a company with a significant loss against it would have a value itself, as would wipe out taxes owed from other earnings potentially, which reduces the loss somewhat.
Doesn’t a worth of 20m get you access to actual professional advice? Not being rude but someone in that position isn’t going to get definitive advice about the best option from a post on here.Due to a number of bad choices/decisions, the project is currently shelved as the cost to build is significantly more than its worth upon completion, so he's left with options of;
a) sit on the land (circa 7 acres) and hope to get planning for multiple dwellings at some point
b) finish the development (which has currently been stopped pending a decision)
c) sell up in its current state which would be tricky as no bathrooms/kitchens currently
Option C will likely result in a loss of around £500-750k. Option B would be likely a similar number.
Its not a great situation to be in, but got me thinking that surely it would have some value in transferring the property into a limited company, completing the development that way (which allows VAT to be recovered, which saves some money, albeit it was only a 5% anyway due to being empty for quite a while), and then when he sells the property at the end for a loss, he's at least got a loss showing on his accounts which can be carried over for future years taxes ?
Am I being stupid here ? As said, its not a great situation, and losing 500-750k (even when your worth maybe 10-20m) isn't a great outcome so was just thinking if there were options available ?
He still invests in companies, and sits as N.E.D on a few boards, so has significant earnings still, so having a company with a significant loss against it would have a value itself, as would wipe out taxes owed from other earnings potentially, which reduces the loss somewhat.
Unless it’s an advert hoping someone sniffs a deal and sends a pm.
Hobo said:
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He still invests in companies, and sits as N.E.D on a few boards, so has significant earnings still, so having a company with a significant loss against it would have a value itself, as would wipe out taxes owed from other earnings potentially, which reduces the loss somewhat.
I don't know whether that would work or not, but even if it did it would only be useful if he operates the rest of his business / professional life through a company. He still invests in companies, and sits as N.E.D on a few boards, so has significant earnings still, so having a company with a significant loss against it would have a value itself, as would wipe out taxes owed from other earnings potentially, which reduces the loss somewhat.
k way to try and save 17p in vat in the middle.Some things spring to mind on the company bit
SDLT
Corp Tax
Legal fees
Accounts fees
VAT in property is complex
CIS if doing building work
The property also needs an assessment by someone experienced in development and planning to look at the options.
Most of us in the sector make a living by charging for advice rather than giving detail on ph.
For instance, I do development options appraisals for local authorities and NHS and proposal reviews for investment funds. They take time and cost money.
SDLT
Corp Tax
Legal fees
Accounts fees
VAT in property is complex
CIS if doing building work
The property also needs an assessment by someone experienced in development and planning to look at the options.
Most of us in the sector make a living by charging for advice rather than giving detail on ph.
For instance, I do development options appraisals for local authorities and NHS and proposal reviews for investment funds. They take time and cost money.
blueg33 said:
Some things spring to mind on the company bit
SDLT
Corp Tax
Legal fees
Accounts fees
VAT in property is complex
CIS if doing building work
The property also needs an assessment by someone experienced in development and planning to look at the options.
Most of us in the sector make a living by charging for advice rather than giving detail on ph.
For instance, I do development options appraisals for local authorities and NHS and proposal reviews for investment funds. They take time and cost money.
Thanks. The planning side of it is all taken care of and contractors ‘were’ all lined up until he decided to mothball it, so that side of things isn’t the concern.SDLT
Corp Tax
Legal fees
Accounts fees
VAT in property is complex
CIS if doing building work
The property also needs an assessment by someone experienced in development and planning to look at the options.
Most of us in the sector make a living by charging for advice rather than giving detail on ph.
For instance, I do development options appraisals for local authorities and NHS and proposal reviews for investment funds. They take time and cost money.
The property was bought outright, so no mortgage. I don’t know about the stamp duty side of things through a limited company so will review.
Corporation tax is likely irrelevant for the reasons advised, as it would would sell for less than it cost, hence me saying the company would generate a loss on this build which could then be used to offset taxes on other earnings.
Legal fees and accounting fees, fine.
Re VAT, appreciate the complications but again having procured the whole project and their being a refurbishment element and a new build element, and the house being unoccupied for a number of years then the VAT side of things is clarified and it’s still a six figure sum, which could be claimed back.
The issue at hand fundamentally is whether he would want to live their personally at the end or sell, as that is unknown at present for a number of reasons, but my question whether such an SPV is viable and more cost efficient overall than doing as a personal build. The key difference here is that its loss making whereas most developments hope to make a profit.
Immediately after Covid there were some bargains about so i'm assuming he bought in 2022 during the frothy era? Out of interest what did he pay for it, and what are the local estate agents saying it is worth once completed today??
If the 7 acres of land is of decent 'equestrian' quality then there's a good market for that size, so would certainly add a bit of desirability to the property if marketed that way. Is it that type of property? If so I would bin the pool and add an annexe.
If the 7 acres of land is of decent 'equestrian' quality then there's a good market for that size, so would certainly add a bit of desirability to the property if marketed that way. Is it that type of property? If so I would bin the pool and add an annexe.
Hobo said:
blueg33 said:
Some things spring to mind on the company bit
SDLT
Corp Tax
Legal fees
Accounts fees
VAT in property is complex
CIS if doing building work
The property also needs an assessment by someone experienced in development and planning to look at the options.
Most of us in the sector make a living by charging for advice rather than giving detail on ph.
For instance, I do development options appraisals for local authorities and NHS and proposal reviews for investment funds. They take time and cost money.
Thanks. The planning side of it is all taken care of and contractors were all lined up until he decided to mothball it, so that side of things isn t the concern.SDLT
Corp Tax
Legal fees
Accounts fees
VAT in property is complex
CIS if doing building work
The property also needs an assessment by someone experienced in development and planning to look at the options.
Most of us in the sector make a living by charging for advice rather than giving detail on ph.
For instance, I do development options appraisals for local authorities and NHS and proposal reviews for investment funds. They take time and cost money.
The property was bought outright, so no mortgage. I don t know about the stamp duty side of things through a limited company so will review.
Corporation tax is likely irrelevant for the reasons advised, as it would would sell for less than it cost, hence me saying the company would generate a loss on this build which could then be used to offset taxes on other earnings.
Legal fees and accounting fees, fine.
Re VAT, appreciate the complications but again having procured the whole project and their being a refurbishment element and a new build element, and the house being unoccupied for a number of years then the VAT side of things is clarified and it s still a six figure sum, which could be claimed back.
The issue at hand fundamentally is whether he would want to live their personally at the end or sell, as that is unknown at present for a number of reasons, but my question whether such an SPV is viable and more cost efficient overall than doing as a personal build. The key difference here is that its loss making whereas most developments hope to make a profit.
blueg33 said:
On the planning element I was thinking about the potential for more houses or maybe something like a care home.
This is an area already gone down. The care home isn't really viable currently due to lack of nearby facilities, and the council said they would not support an application for multiple houses, so it seems the only option (currently) is the agreed planning for a single home of considerable size.Gassing Station | Business | Top of Page | What's New | My Stuff