Using trading income to diversify into Property

[peakfreans]

Hi,
I am currently running a limited company selling computers. Can I use part of my trading income to diversify into property investment through the same company or do I have to pay my corporation tax and then use any profits to purchase the property. The property will be in the company name and will for rental income for the company. Any advice will be appreciated.

Thanks

[jpcentral]

Presuming that the company's Articles of Association permit the activity of property investment there is no problem in doing so. However, you would not save any Corporation Tax. The property would be a capital item and the purchase price would not therefore be a deductible expense.

John Perry
Central Business Services
Loughborough
www.centralbusiness.co.uk

[deanshepherd]

Furthermore, holding a residential investment property in the company, as oppose to individually, may not be the best approach. There are more significant tax reliefs available for individuals when you come to sell the property. Companies will pay corporation tax on any gain.


Dean
dean.shepherd@mmi-online.co.uk
MMI Accountancy
www.mmi-online.co.uk

[peakfreans]

Thankyou very much for you help.

The purchases will be a long term investment for rental income purposes, the computer business can be flaky, therefore in the future the rental income may form a greater majority of my income. In this scenario would it not be best to purchase through the company at least I would save tax on dividends extraction in the short term and may get taper relief on any gains on disposal in the future.

Again would appreciate any advice and thankyou all in advance.

Regards
Peakfreans

[deanshepherd]

Companies do not get taper relief, only individuals do.

You could still own the property individually and have the company manage it.


Dean

[peakfreans]

Thanks thats been very helpful

Sorry I have further question on this issue, if the properties were commercial properties, ie shops for which I received rent, what would the situation be on disposal, could I claim business asset taper relief, or is that not possible.

Thanks again
Peakfreans

[paul.e]

No business asset taper relief is allowable on commercial property only non business asset taper relief

[paul.e]

Sorry should have added a company owning commercial property only gets non business assst taper releif. Individuals owning and letting to trading companies ( non PLC ) or sole readers will get business asset taper relief. Another reason to buy as an individual.

[paul.e]

Sorry again should be Sole traders