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Where Taxpayers and Advisers Meet

What is the most tax efficient way to buy a property with cash from my business bank acc?

Jimbob123
Posts:1
Joined:Thu Nov 01, 2018 8:31 pm
What is the most tax efficient way to buy a property with cash from my business bank acc?

Postby Jimbob123 » Thu Nov 01, 2018 8:48 pm

Hi all,

Newbie to the forum here with lots of questions, please go easy on me.

My business partner and I set up our ltd company three years ago and it's going very well.

We have zero employees and have paid all tax and vat owed so far, and have no debts or outstanding bills.

We currently have 200k in the business bank account doing nothing.

By next May, my business partner and I anticipate we will have enough money in the account to buy two properties cash.

I have forecasted that by then we should have enough cash in the business bank account to pay for them.

These will be residential homes for each of us to live in so see this as an investment in. We do not have great credit scores for numerous reasons which gives me doubts that I will be able to get a mortgage which is why I'm keen on buying the property with cash, outright.

I'm aware we cannot just take the money out (150k+ each) of the business without paying hefty personal tax bills so would like some guidance on how to do this in the most tax efficient way.

I have spoke with my accountant who has suggested a couple of ideas including take the 40% hit on personal tax which just isn't tax efficient enough for us.

Can anyone suggest how I can buy my property in the most tax efficient way possible?

Any information on this would be great, also any additional tips or advice would be great.

Thanks in advance

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: What is the most tax efficient way to buy a property with cash from my business bank acc?

Postby AGoodman » Mon Nov 05, 2018 3:01 pm

There's no easy fix. If you keep the cash/property in the company:

- you will generate an income liability each year as a benefit in kind - https://www.gov.uk/expenses-and-benefits-accommodation/work-out-the-value (not actually very helpful!)
- you won't benefit from PPR so any gain on a sale will be taxed at corporation tax rates
- the company probably won't benefit from BPR (inheritance tax) or entrepreneurs relief on a sale/dissolution
- if you ever want to sell the business there is the sticky problem that it owns your homes.

Lending the money to yourselves will generate an annual benefit in kind charge and a substantial participators loan charge on the company.

Dissolving the company probably won't work because if you continue the business (as you would wish), the dissolution will be taxed to income tax anyway under the anti-phoenix rules.

There are benefits to taking the early pain - particularly PPR if the property market takes off again.

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: What is the most tax efficient way to buy a property with cash from my business bank acc?

Postby SteLacca » Tue Nov 06, 2018 4:12 pm

If you are also shareholders then you can reduce that 40% to 32.5% (or 38.1% to the extent that you total income exceeds £150k) by declaring dividends rather than taking via payroll.


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