BTL individually owned, let through a LTD Company?

Reply to the comment left by "andrew sheppard" at "28/03/2015 - 09:57":

if you have no mortgages on them why not sell them to the limited company? Instead of paying you the Company owes you the money via a directors loan account which means you can take any profit out very efficiently. Just a thought.

Providing the Ltd company discharges it's legal obligations as managing agent I very much doubt that there would be any "see through" in the event of a claim; logically why would there be any need for it if the compnany and directors had fulfilled their obligations (e.g. maintenance and repairs) and the appropriate Ltd's insurance met the claim if valid? I would suggest getting legal advice though to ensure that the agreement between you personaly and the Ltd are correctly set up for this purpose (i.e. the Ltd company accepting responsibility as part of the sub-letting agreement) if nothing else.
From a profit/tax point I know that wasn't the motive for the structure but presumably profit is the motive for the BTL in the first place! As such, is the structure questionable? Absolutely not? It does appear though that more could be made of it even based on the scant inforamtion. I note that you are both 20% tax payers but obviously we don't know to what extent. First, taking dividends means the Ltd is paying corporation tax (dividends not being deductible) but you are also taking minimum salaries. You could take much more, up to around £7k each with no NI payable. Do you have contracts of employment? If you do you have take account at least of the pension auto-enrollment obligations. You could structure the financials in any number of ways e.g. the higher salaries would facilitate company (only) pension contributions, Where are you deducting property running costs? How will you finance capital costs (i.e. non deductible expenditure that adds to you CGT base cost), these must be paid personally as they are your asset but ideally these should be covered from cashflow from the properties. I would suggest speaking with both legal and accounting proffessional but ensue the latter is REALLY well versed in property specific tax matters, many, most even, are not.

Andrew,

I am a 40% tax payer through my full-time job. Therefore, with my portfolio of properties, I did EXPLORE options to setup a similar 'scheme' - whereby I would lease my properties to a ltd company at a lower rate and then the ltd company will rent them out at market rate. Having discussed this with several accountants, I was clearly advised against going down this route - as it could be seen as Tax Avoidance by HMRC. The leasing to the ltd company at peppercorn rates will be the show-stopper - could you make an anonymous enquiry with the HMRC?

I now rent all of my properties directly and the income therefore is taxable under self-assessment - I manage some of the funds by contributing a lot into my personal pension at work (with tax saving).

Hope this helps?

Cheers,
Mervin

Very interesting indeed. Any accountants on this forum who can confirm or refute? I am a 60% rate tax payer for my PAYE day job and also own a LTD company. My brother and I share an 'out of hours' property business - could I lease my brothers houses to me and likewise, my I can lease mine to my brother? Clearly would be of great financial benefit (i think) - but all are mortgaged in individual names...

Just seen Mervin's post - probably all does sound like tax avoidance! But this pension thing sounds interesting Mervin - how do you link your property business with your daytime job pension contribution?

Reply to the comment left by "Mike Daniels" at "29/03/2015 - 19:31":

Mike,

I don't link my property business with my daytime job pension - sorry, if that's what my post reads like.

I just contribute a large proportion of my daytime salary to my work pension through 'salary sacrifice'. Therefore, my take-home is much less (taxable income), which when added with my rental income gives me the life-style I need. Does this help?

Regards,
Mervin

Reply to the comment left by "Mike Daniels" at "29/03/2015 - 19:28":

I am not sure what advantages you see, but problems. Lenders for a start possibly as BTL mortgages are usually onky leasable under ASTs aren;t they? If the values are pretty much the same you msy find tgat HMRC would seek to apply the principle known as The Ramsay Principle see wiki "The House of Lords decided that where a transaction has pre-arranged artificial steps which serve no commercial purpose other than to save tax, then the proper approach is to tax the effect of the transaction as a whole".

Reply to the comment left by "Mike Daniels" at "29/03/2015 - 19:28":

I am not sure what advantages you see, but problems. Lenders for a start possibly as BTL mortgages are usually onky leasable under ASTs aren;t they? If the values are pretty much the same you msy find tgat HMRC would seek to apply the principle known as The Ramsay Principle see wiki "The House of Lords decided that where a transaction has pre-arranged artificial steps which serve no commercial purpose other than to save tax, then the proper approach is to tax the effect of the transaction as a whole".

Reply to the comment left by "Jon Bourne" at "28/03/2015 - 12:48":

Confusion viz sell/loan. You could sell them to the company but it will have to buy them. A CGT liability might arise and certainky SDLT etc. How will the company finance them? Fewer BTL mortgages are available, tend to cost more although maybe available on a portfolio basis. Capital gains would then fall on the company and of course with no annual allowance. Realised profits on sale are just ordinary trading profit and can be distributed, spent, reinvested as seen fit. On the other hand you could loan them to the company and be paid taxable interest. A loan might be trickier as, if notionally the value is paid from cashflow over say 15 years, what happens to the asset? If it has been accounted for as both an asset and liability the liability will, theoretically, have been discharged. If the company then makes a second payment to you (the property) it would be taxable as income! and te company would have a big hole in its balance sheet. I wouldn't go down that route.

Reply to the comment left by "andrew sheppard" at "26/03/2015 - 12:41":

I still don't understand why you are volunteering to pay corporation tax which you don't need to? You should be able to pay salaries below Classl NI thresholds, company pension contributions, and a host of other legitimate expensesand "sweet spot" the levels so that your self assesed profit falls below Class lV (unless you are making a lot of profit but mitigation is the objective). Assurance re "tax avoidance". I used to be an MLRO (money laundering reporting officer) for an FSA regulated company. I woul NEVER condone illegal tax evasion and it really gets my goat that politicians wilfully conflate tgat with perfectly legal tax avoidance; as a finance director you hsve a fiduciary duty to do just that. See In Ayrshire Pullman Motor Services & Ritchie v CIR ((1929) 14 TC 754) Lord Clyde remarked:

"No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores. The Inland Revenue is not slow - and quite rightly - to take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer's pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Revenue".