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Where Taxpayers and Advisers Meet

Buy to Let, Business or Personal

pete710UK
Posts:2
Joined:Mon Nov 23, 2020 10:14 pm
Buy to Let, Business or Personal

Postby pete710UK » Mon Nov 23, 2020 10:23 pm

Hello, I hope someone can help, I am buying small house for a friend who has fallen on hard times, the plan is to buy the property for him and his family to rent for a few years before they buy it from me for the same price I paid. They hope to have a deposit within a few years at that time I will sell the house to them. I am wondering if I should buy the house using existing company funds (currently earning no interest) or use personal savings which we could just about afford. We hold 2 properties as buy to lets personally so feel that I would be better off paying tax at limited co rates rather than higher rate? any help very welcome. many thanks

AGoodman
Posts:1131
Joined:Fri May 16, 2014 3:47 pm

Re: Buy to Let, Business or Personal

Postby AGoodman » Wed Dec 02, 2020 11:30 am

Probably makes sense on the purchase and sale but bear in mind that if the price has risen before the sale:

- a sale at an undervalue will be a chargeable transfer for IHT by the shareholders - this should be absorbed by your annual exemption and nil rate band so no actual tax to pay. It could be an issue if you then died within 7 years because it would reduce the nil rate band available to set against other assets in your estate.
- there must be a good chance/risk that the undervalue could be treated as a deemed distribution or benefit to you (as shareholder or director) so subject to income tax in your hands.

Others may well known the details and level of risk for point 2 better than me.

bd6759
Posts:3451
Joined:Sat Feb 01, 2014 3:26 pm

Re: Buy to Let, Business or Personal

Postby bd6759 » Wed Dec 02, 2020 11:01 pm

You could lend him the money to buy the home, with security over it (a mortgage). It could be interest only or capital and interest, with a repayment level set similar to the rent you would charge. When he can afford it, he could re-mortgage with a lender to repay you.


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