buying small business premises - personal or via ltd co
Discussion
Hi
Just about to purchase a small industrial unit (1200 sq ft) in the s/east for my ltd company to occupy. I have the cash available (£60K) for the purchase.
Would I be better off:
1) lending the money to ltd co and then ltd co purchases the unit, repaying my loan
2) Buying the unit myself and renting it to the ltd co
3) something else!
To complicate things further I'm living in the channel islands and paying my taxes here.
Just about to purchase a small industrial unit (1200 sq ft) in the s/east for my ltd company to occupy. I have the cash available (£60K) for the purchase.
Would I be better off:
1) lending the money to ltd co and then ltd co purchases the unit, repaying my loan
2) Buying the unit myself and renting it to the ltd co
3) something else!
To complicate things further I'm living in the channel islands and paying my taxes here.
The general consensus these days is for premises to be held outside limited companies - unless there is some overiding tax reason for having the building in the company name.
The demise of the old Industrial Buildings Allowance would reinforce that point of view.
If the company owns the property, if and when it sell that property, it would be subject to Capital Gains Tax on the disposal (assuming the property was sold for more than it was purchased).
From A VAT point of view, it would be possible to recover VAT on minor repairs and maintenance to the property. However if you wanted to be able to recover VAT on the main costs of the building, you would have to "Opt for VAT" on the property and that would cause ramifications if and when the property was eventually sold.
As you are a Channel Islands tax resident, if you own the property personally, the company can rent the property from you. The company will get tax relief at UK Corporation Tax rates on the rental payments and you would pay personal income tax on the Rental Income you receive, but at the favourable Cjhannel Island income tax rates.
The main thing to watch out for would be to ensure that the rent paid was at a genuine market rate - i.e. that you were not extracting excessive rent from your own company in order to artificially reduce the profit (and subsequent Corporation tax liability) of the company.
I assume you will be discussing this with your accountants.
The demise of the old Industrial Buildings Allowance would reinforce that point of view.
If the company owns the property, if and when it sell that property, it would be subject to Capital Gains Tax on the disposal (assuming the property was sold for more than it was purchased).
From A VAT point of view, it would be possible to recover VAT on minor repairs and maintenance to the property. However if you wanted to be able to recover VAT on the main costs of the building, you would have to "Opt for VAT" on the property and that would cause ramifications if and when the property was eventually sold.
As you are a Channel Islands tax resident, if you own the property personally, the company can rent the property from you. The company will get tax relief at UK Corporation Tax rates on the rental payments and you would pay personal income tax on the Rental Income you receive, but at the favourable Cjhannel Island income tax rates.
The main thing to watch out for would be to ensure that the rent paid was at a genuine market rate - i.e. that you were not extracting excessive rent from your own company in order to artificially reduce the profit (and subsequent Corporation tax liability) of the company.
I assume you will be discussing this with your accountants.
Eric Mc said:
If the company owns the property, if and when it sell that property, it would be subject to Capital Gains Tax on the disposal (assuming the property was sold for more than it was purchased).
Wouldn't there be a CGT liability if the individual owned it too? assuming is was not their PPR which obvioulsy it is not, or would it just attract income tax on the disposal which is basically the same thing?Edited by jamesuk28 on Friday 27th February 16:30
Eric Mc said:
ACEParts is a Channel Islands resident so I can't comment on his personal exposure to CGT.
Do they even HAVE CGT in the Channel Islands and, if so, what rate applies?
Ahhh, I see said the blind man. How many £millions do you need these days to get into the Channel Islands? is that where Ted has gone?Do they even HAVE CGT in the Channel Islands and, if so, what rate applies?
jamesuk28 said:
Eric Mc said:
ACEParts is a Channel Islands resident so I can't comment on his personal exposure to CGT.
Do they even HAVE CGT in the Channel Islands and, if so, what rate applies?
Ahhh, I see said the blind man. How many £millions do you need these days to get into the Channel Islands? is that where Ted has gone?Do they even HAVE CGT in the Channel Islands and, if so, what rate applies?
Eric Mc said:
What's the CGT situation where you live?
Since 1960, companies and individuals have paid income tax at the rate of 20%. There is no separate corporation tax. Guernsey levies no capital gains, inheritance, capital transfer, value added (VAT / TVA) or general withholding taxes.ACEparts_com said:
jamesuk28 said:
Eric Mc said:
ACEParts is a Channel Islands resident so I can't comment on his personal exposure to CGT.
Do they even HAVE CGT in the Channel Islands and, if so, what rate applies?
Ahhh, I see said the blind man. How many £millions do you need these days to get into the Channel Islands? is that where Ted has gone?Do they even HAVE CGT in the Channel Islands and, if so, what rate applies?
AceParts, what do you feel the advantage of laying out 60k on a 1200sq ft place is over renting?
Renting a 1200sq ft would probably cost you around £600-700 per month? If you ever wanted a bigger or smaller place you could up and leave within your lease terms. Would the 60k not be better invested in your business on new stock or something else that would increase sales and revenue?
Renting a 1200sq ft would probably cost you around £600-700 per month? If you ever wanted a bigger or smaller place you could up and leave within your lease terms. Would the 60k not be better invested in your business on new stock or something else that would increase sales and revenue?
thisislife said:
AceParts, what do you feel the advantage of laying out 60k on a 1200sq ft place is over renting?
Renting a 1200sq ft would probably cost you around £600-700 per month? If you ever wanted a bigger or smaller place you could up and leave within your lease terms. Would the 60k not be better invested in your business on new stock or something else that would increase sales and revenue?
I completely and utterly agree with you! I'm a great advocate of renting - and have enjoyed every benefit it brings.Renting a 1200sq ft would probably cost you around £600-700 per month? If you ever wanted a bigger or smaller place you could up and leave within your lease terms. Would the 60k not be better invested in your business on new stock or something else that would increase sales and revenue?
This property is going particularly cheap, hence my sudden interest in the purchase. I view buying property as a ball and chain!
Edited to add; my accountant in the Channel islands have said that purchasing a UK property opens up a whole can of worms!
Edited by ACEparts_com on Sunday 1st March 16:05
ACEparts_com said:
thisislife said:
AceParts, what do you feel the advantage of laying out 60k on a 1200sq ft place is over renting?
Renting a 1200sq ft would probably cost you around £600-700 per month? If you ever wanted a bigger or smaller place you could up and leave within your lease terms. Would the 60k not be better invested in your business on new stock or something else that would increase sales and revenue?
I completely and utterly agree with you! I'm a great advocate of renting - and have enjoyed every benefit it brings.Renting a 1200sq ft would probably cost you around £600-700 per month? If you ever wanted a bigger or smaller place you could up and leave within your lease terms. Would the 60k not be better invested in your business on new stock or something else that would increase sales and revenue?
This property is going particularly cheap, hence my sudden interest in the purchase. I view buying property as a ball and chain!
Edited to add; my accountant in the Channel islands have said that purchasing a UK property opens up a whole can of worms!
Edited by ACEparts_com on Sunday 1st March 16:05
London units in my part of town (E1) make £200 psf sale, or much more if there's potential to redevelop with residential above new commercial.
Rents here are around £14-15psf; as a reference point, I know in Swanley (M25/M20 junction) they're not far below this.
In general, a lease would be on a FRI basis anyhow, so you might as well own it at that price. If you can let it out for anything above £4psf then you're very definitely in-the-money!
Can't comment on the tax implications, however; sorry.
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