tax relief on property investment

[cohod]

Hello all.

I run a small mail order business which has built up considerable reserves over the last 10 years. The market in which i operate has become more and more competetive and i am looking at investing in a new business so i am not totally reliant on one thing. I don't have a great deal of time so i am looking at either buying a commercial property to lease out or buying some holiday lets overseas which i would use to start a small holiday business.

What i am interested in is whether i would get any tax relief on a purchase like this?

I assume i am more likely to get relief on a commercial property but could holiday lets be considered as well?

If not, could you buy a business that had holiday property as an asset and get tax relief that way?

Apologies if i am being incredibly naive, i have done some research but have been unable to find any answers.

many thanks

[pqtaxation]

.

I run a small mail order business which has built up considerable reserves over the last 10 years.

Are you saying your business is incorportated (a private limited company) with you as sole shareholder or are you a sole trader (unincorporated business) and have cash available for property investment as a result of your business' past trading success?

[cohod]

i am a 60% shareholder in a LTD company, my wife holds the other 40%

yes, we have cash available from profit made in previos years which we have not paid out as dividends

thanks

[pqtaxation]

As the company holds the cash, it is the company which would make the investment in property being contemplated (with possibly mortgage financing). The alternative is for the company to pay out the dividends to your wife and yourself and for you as individuals to make the investment in property (with possibly mortgage financing).

As a generalisation, there are no immediate reliefs for the company (from corporation tax) as a result of it using its cash to make property investments nor are there for individuals (from income tax).

There are a number of advantages and disadvantages to each alternative - company or individual: how they balance out in your and your wife’s case (so as to select the preferred alternative) depends on your specific circumstances as well as those of the company and the type of contemplated investment(s). Such an analysis of advantages and disadvantages is best undertaken by a professional, whose fees can be thought as a small addition to the investment’s cost, after your having given them all those circumstances rather than here on a BB.

Presumably the person who prepares your company’s statutory accounts cannot do this for you. A qualified accountant, recommended by friends and specialising in family-owned limited companies, would usually give you a free initial consultation, especially if you indicate you may be willing to transfer the preparation of your company's statutory accounts to their firm. There may be later issues for your wills and estate planning (for example loss of business relief on company’s shares if it were to become an investment rather than trading company) that you may wish to discuss with your solicitor who prepared your wills before proceeding.

[cohod]

i thought that might be the case (no tax relief) but many thanks for helping to clear it up. i will have a think about what to do next.

thankyou

[Incredulum]

If you invest in commercial buildings then you will be entitled to capital allowances on a proportion of the investment cost. Likewise UK furnished holiday lets,