Can I live in a property owned by my ltd company?

[trowelhead]

As per title,

I'm looking at a property id like to buy via my ltd company

I'd like to live in it for about 2 years then rent it out

Is there anything stopping me? Can my company pay for bills and council tax? Do I need to pay a rent back to company? Can I set it artificially low?

Thanks

[Sarnie]

trowelhead said:

As per title,

I'm looking at a property id like to buy via my ltd company

I'd like to live in it for about 2 years then rent it out

Is there anything stopping me? Can my company pay for bills and council tax? Do I need to pay a rent back to company? Can I set it artificially low?

Thanks

Bought for cash or mortgaged?

[PurpleMoonlight]

If you pay anything less than market rent it will be deemed as a benefit in kind and taxed accordingly.

[trowelhead]

Sarnie said:

Bought for cash or mortgaged?

Bought for cash, excess funds in company

[trowelhead]

PurpleMoonlight said:

If you pay anything less than market rent it will be deemed as a benefit in kind and taxed accordingly.

Ok - how would that work?

Also - what if i was living in the property for commercial purposes, e.g refurbishment?

[PurpleMoonlight]

trowelhead said:

Ok - how would that work?

Also - what if i was living in the property for commercial purposes, e.g refurbishment?

You operate as a Ltd and you don't know how BIK works?

Why would living in it be deemed for commercial purposes?

[trowelhead]

PurpleMoonlight said:

You operate as a Ltd and you don't know how BIK works?

Why would living in it be deemed for commercial purposes?

Yes i understand the concept of BIK, but i do not know if there is some kind of calculator/rates as there is with working out BIK for cars etc.

[barryrs]

A quick look on the typical property search engines should tell you what the market rate would be for the rental income so anything less i guess would be taxable as BIK.

[trowelhead]

So what i'm trying to fathom is if it might make sense to buy in the company and pay the BIK rather than draw a dividend, subject to 40% tax.

Seen as i also plan to rent this place out in a couple of years - it might make sense.

[Europa1]

Are you a director of the company? If so, check the position on substantial property trabsactions involving directors (not sure if this type of deal would be caught or not). What's the corporate benefit in the company using its funds to buy and run a property for you to live in?

[Eric Mc]

Legally you can, of course.

Tax wise, it may not be such a clever idea.

Don't forget the MASSIVE tax break home owners get under Capital Gains Tax when they dispose of their main residence. You would lose that if the house was owned by a company.

And, has been mentioned, there are Income Tax issues as well.

[Davel]

You really should talk to your Accountant over this.

There may be tax implications on paying a lesser rent (BIK wise).

You might be able to live there and refurbish it whilst doing so at a lower rental perhaps as you are looking after the place whilst being done up.

What commercial purposes would it be used for? Might there be planning issues etc ?

If it's your company and it's cash rich, could you maybe take a dividend and buy the house in your own name?

Either way, get proper advice.

[trowelhead]

Davel said:

You really should talk to your Accountant over this.

There may be tax implications on paying a lesser rent (BIK wise).

You might be able to live there and refurbish it whilst doing so at a lower rental perhaps as you are looking after the place whilst being done up.

What commercial purposes would it be used for? Might there be planning issues etc ?

If it's your company and it's cash rich, could you maybe take a dividend and buy the house in your own name?

Either way, get proper advice.

Cheers, just looking to get a general overview.

Tax rules seem complex (for a change), this property is for sale at under £75k, which leads me to...

Where the employer owns the property the BiK value is determined by how much the employer paid to purchase it, including the cost of any improvements (C). If the total cost is less than £75,000 the BiK value is equal to the 1973 Gross Rating Value (GRV), usually quite a modest sum. If it cost more than £75,000 the BiK value is determined by the formula: GRV + ((C - £75,000) x Official Rate of Interest).

So if the place has a low GRV (whatever that is) then the BIK will be equal to this?

[trowelhead]

Eric Mc said:

Don't forget the MASSIVE tax break home owners get under Capital Gains Tax when they dispose of their main residence. You would lose that if the house was owned by a company

True, but my plan is to rent it for the long term so not taking that into account.

[trowelhead]

Europa1 said:

Are you a director of the company? If so, check the position on substantial property trabsactions involving directors (not sure if this type of deal would be caught or not). What's the corporate benefit in the company using its funds to buy and run a property for you to live in?

Cheers will do. Corp benefit will be an asset that will be income generating in a couple of years time.

[trowelhead]

Found this online...

Your quote is from para. 21.9, headed "Calculation of cash equivalent: accommodation cost £75,000 or less". If the property cost less than £75,000, the BIK is the 1973 gross rateable value, assuming that the property is in England or Wales. The rateable value was intended to be the annual rent the property would fetch on the open market. The trouble is that now that we all pay council tax, no-one, except perhaps the water company, uses the rateable value, so you might find it difficult to establish. The good thing is that HMRC does not know it either and is unlikely to challenge an estimate of £1,200.

So if i pay £1200 bik a year while living there - i'm good to go?

If so - that works out better than taking a big dividend and paying 40% tax on whole amount?

[Davel]

But at the end of the rental period, would you prefer the house to be your's or the company's?

It may provide a useful nest egg for retirement if it's your's alone.

[sideways sid]

Also, there is a question of aspiration.

Do you intend that the company rents the property out and distributes the net rent to you for income, or do you intend to use further excess funds to buy more properties to build a property company over time?

[Eric Mc]

Does your limited company carry out a normal trading activity?

If it does, how long will it exist?

What's the plan if you decide to wind up the company?

What's the plan if you decide to sell the property?

[PurpleMoonlight]

This might help you.

https://www.gov.uk/government/uploads/system/uploa...