Owning property within a holding company.

[KingRichard]

Hi Guys,

Been approved for a mortgage finally ( been in one job long enough to get there ).

But my intention isn't to buy somewhere to live, I want to get a bit of passive income going. The intention was to do a couple of Buy to lets, staggering their purchase over the next 18 months or so, but I'm convinced there is a smarter way of building a portfolio.

Is it possible to set up a limited company (or otherwise) with the intention of using the company business plan to generate investment into larger scale residential development? I looked into new developments a couple of years ago and decided it was safer to hang onto my money than risk it in a market dominated by big dicks and even bigger budgets.

But if I decided to build / renovate property with the intention of generating a rental income, that is surely less of a risk for investors (The Bank) than a greenie trying to trade option agreements and spin property back 2 back

This has only been flicking around my head since I got an Agreement on the mortgage a couple of days ago, so apologies if it seems a bit random...

Lets blue sky it, run it up the flagpole and ooh lets see what comes off the top

[Eric Mc]

If you use a company to buy and operate/manage investment properties, the company will be subject to the full rates of Corporation Tax on all its profits, it will be subject to the full whack of Capital Gains Tax at the higher rate of Corporation Tax when the properties are disposed of and will have to meet stringent reporting and annual valuation requirements when preparing the statutory accounts each year.

[KingRichard]

Eric Mc said:

If you use a company to buy and operate/manage investment properties, the company will be subject to the full rates of Corporation Tax on all its profits, it will be subject to the full whack of Capital Gains Tax at the higher rate of Corporation Tax when the properties are disposed of and will have to meet stringent reporting and annual valuation requirements when preparing the statutory accounts each year.

Can you not hold any gains made as operating capital?

Thanks

David

[Eric Mc]

There are techniques allowed for holding over or rolling over gains so that the CGT is deffered. These options are generally available to individuals as well - depending on the nature of the asset and what is done with the proceeds on disposal.

[srebbe64]

I've known people who have held onto property through a limited company thinking they could get 75% Tax (taper) relief on the capital gain. However, the Inland Revenue aren't dumb enough to allow this!

On the general principle of property ownership, I take the view it's best to own it privately - possibly through a self administered pension scheme, which is quite tax efficient.

[KingRichard]

srebbe64 said:

I've known people who have held onto property through a limited company thinking they could get 75% Tax (taper) relief on the capital gain. However, the Inland Revenue aren't dumb enough to allow this! On the general principle of property ownership, I take the view it's best to own it privately - possibly through a self administered pension scheme, which is quite tax efficient.

I'm not pensions qualified, do you know a lot about retirement planning mate? Is there a time constraint over the length of time it has to run, minimum age etc. Or do you just declare your investments as 'part of retirement planning'

[Eric Mc]

I'm not an expert on the investment requirements on pensions but they are pretty restrictive. New rules came into effect on 6 April wich did free up some of the rules but they are still fairly onerous.