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Where Taxpayers and Advisers Meet

Purchasing property as limited company

PropertyKing
Posts: 5
Joined: Tue Jul 09, 2019 6:34 pm

Purchasing property as limited company

Postby PropertyKing » Tue Jul 09, 2019 6:53 pm

Hi all,

I am about to register as a limited company to pursue my property investment career, taking on some corporate lets and one assisted sale.

The assisted sale is a small 2 bed property which we had agreed on the asking price, how we would fund the renovation, and the percentage split on any profits above the asking price (minus the renovation costs).

However, the gentleman proposed an alternative today, saying I could live in the property and do the work at my own expense, while paying for the property in installments over a 3-5 year period. There maybe some rental costs during the period, I need to clarify.

This got me thinking, could I purchased this over the 3-5 year period under my limited company, by using my annual takings/profits without incurring tax on those profits? Only incurring tax when/if I decided to sell the property (once owned outright) at a later date?
Unless I sold to reinvest into the company by buying more property under the limited company?

Or would I end up getting hit with double tax somewhere?

Thanks

AGoodman
Posts: 886
Joined: Fri May 16, 2014 3:47 pm

Re: Purchasing property as limited company

Postby AGoodman » Wed Jul 10, 2019 2:07 pm

No. If a company makes payments to acquire a property, that expenditure cannot be set against other profits. It could only be deducted from the sale price when it sold the property.

and if you lived in the property you would be receiving a taxable benefit in kind from the company

PropertyKing
Posts: 5
Joined: Tue Jul 09, 2019 6:34 pm

Re: Purchasing property as limited company

Postby PropertyKing » Wed Jul 10, 2019 6:22 pm

Thanks for the reply AGoodMan,

Sorry but I'm struggling to understand lol..

Set against other profits??

It could only be deducted from the sale price when sold?
Do you mean the tax can only be deducted when sold?? Until sold it remains an untaxable asset??

A taxable benefit in kind?
I would get taxed?? On what, rent??

Apparently there is no such thing as a stupid question... But I feel stupid! Lol :)

Thanks again for your help.

robbob
Posts: 2842
Joined: Wed Aug 06, 2008 4:01 pm

Re: Purchasing property as limited company

Postby robbob » Thu Jul 11, 2019 8:12 am

Set against other profits??

It could only be deducted from the sale price when sold?
Do you mean the tax can only be deducted when sold?? Until sold it remains an untaxable asset??
Generally spekaing
Its pretty simple if you have other income that is taxable you cannot set cost of purchase of property against that other income around the time of purchase.
The cost of the property is not allowable against anything until the property is sold at which time the cost price will deducted from sales proceeds and the company will be taxed on the difference - unless the company has losses than can be used (not all other losses the company has may be allowable if they exist at that time)
A taxable benefit in kind?
I would get taxed?? On what, rent??
Apparently there is no such thing as a stupid question... But I feel stupid! Lol :)
The company is a different legal entity to you - its easier to say it would be more akin to an employer than you for these benefit rules.

If an employer gives an employee keys to a house for personal use the employee get taxed on that benefit - probably on market value rent that would have been charged.

The same principle applies to you if the company gives you use of the property and doesn't charge market value rent then you will have a benefit charge that must be administered by the company via payroll deduction or completion of p11.

running a company gets complicated quickly and particualrly so if any has dual business and private use - thats annoying as mobile phones / computers / cars / tools and equipment / home office etc - all tend to have business and private use and there are always somewhat technical aspects to how these expenses can or cannot be claimed and how private use adjustment is made

PropertyKing
Posts: 5
Joined: Tue Jul 09, 2019 6:34 pm

Re: Purchasing property as limited company

Postby PropertyKing » Fri Jul 12, 2019 8:15 am

Set against other profits??

It could only be deducted from the sale price when sold?
Do you mean the tax can only be deducted when sold?? Until sold it remains an untaxable asset??
Generally spekaing
Its pretty simple if you have other income that is taxable you cannot set cost of purchase of property against that other income around the time of purchase.
The cost of the property is not allowable against anything until the property is sold at which time the cost price will deducted from sales proceeds and the company will be taxed on the difference - unless the company has losses than can be used (not all other losses the company has may be allowable if they exist at that time)
A taxable benefit in kind?
I would get taxed?? On what, rent??
Apparently there is no such thing as a stupid question... But I feel stupid! Lol :)
The company is a different legal entity to you - its easier to say it would be more akin to an employer than you for these benefit rules.

If an employer gives an employee keys to a house for personal use the employee get taxed on that benefit - probably on market value rent that would have been charged.

The same principle applies to you if the company gives you use of the property and doesn't charge market value rent then you will have a benefit charge that must be administered by the company via payroll deduction or completion of p11.

running a company gets complicated quickly and particualrly so if any has dual business and private use - thats annoying as mobile phones / computers / cars / tools and equipment / home office etc - all tend to have business and private use and there are always somewhat technical aspects to how these expenses can or cannot be claimed and how private use adjustment is made
Thanks robbob,

Yes, complicated is not the word lol :shock:

So would all this be the same if I was to use a lease-option to squire the property at a later date, and rent out the property to a third party?
I did read somewhere that while you cannot rent the property to yourself, you can rent it to your limited company and use it that way?
:?:

PropertyKing
Posts: 5
Joined: Tue Jul 09, 2019 6:34 pm

Re: Purchasing property as limited company

Postby PropertyKing » Fri Jul 12, 2019 8:17 am

*aquire

bd6759
Posts: 3109
Joined: Sat Feb 01, 2014 3:26 pm

Re: Purchasing property as limited company

Postby bd6759 » Sat Jul 13, 2019 6:20 pm

Yes, complicated is not the word lol :shock:

So would all this be the same if I was to use a lease-option to squire the property at a later date, and rent out the property to a third party?
I did read somewhere that while you cannot rent the property to yourself, you can rent it to your limited company and use it that way?
:?:
If you find it complicated, why are you dreaming up increasing complex scenarios?

Engage an advisor to talk you through the options.

PropertyKing
Posts: 5
Joined: Tue Jul 09, 2019 6:34 pm

Re: Purchasing property as limited company

Postby PropertyKing » Sun Jul 14, 2019 12:25 am

Because it's how you learn.. and is what has enabled me to be in a position to invest in property at such a young age.
I'll admit that asking people on the internet is not the best source of knowledge, but have to start somewhere.

Thanks for your useful input


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