Buying a buy to let through a limited company

I have had a property in a Ltd Company for over 40 years. Eight years ago I passed it on to my two children. Recently they considered selling it and adding money to buy a better property but the realisation that a considerable tax, very much like a mansion tax or as David Price called it an 'Envelope' tax is to be lowered to properties worth £500,000 within Companies, they abandoned the idea.

Selling the property is prohibiting as any gains/profits is subjected to Corporation tax and taxed again at 40% if my two children want to take the money out of the company. Also the new tax laws will, due to their salary make the company much less profitable for them. The accounts are difficult and would be expensive in relation to the turnover if we did't have Dad do them! So small companies beware. I made a big mistake forty years.

Reply to the comment left by "Yvonne Francis" at "28/08/2015 - 20:44":

The strict title is Annual Tax on Enveloped Dwellings, I cannot take the credit for the name as it was devised by HMGovernment. More information can be found at https://www.gov.uk/guidance/annual-tax-on-enveloped-dwellings-the-basics

Reply to the comment left by "David Price" at "28/08/2015 - 22:43":

I'm wondering, David, at what date the window tax was abolished. Do you have the historical information on this? And the raison d'etre for it abandonment? (lol)

Reply to the comment left by "Ros ." at "30/08/2015 - 00:48":

The Window tax was introduced in 1696 and repealed in 1851 when it was replaced by a tax on inhabited houses. Window tax was not dissimilar to the current Council tax but with fewer bands.
As to the raison d’être perhaps it would be pertinent to ask the French who abandoned the tax ( Impôt sur les portes et fenêtres) in 1926.

I very seriously considered buying my most recent property through a company but I can't justify it as a long term strategy. Yes, it might mean I pay less tax initially, but as soon as I change lifestyle and become a 20% taxpayer the balance tips the other way; and I would rather like to do that within the next eight years.
In any case, I don't trust any government not to change the rules if they think landlords are setting up companies to bypass their latest revenue-raising scheme.

AIUI ATED isn't payable if the property is rented out?

Section 31 of this document outlines

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/375750/ated-tech-guide.pdf

The only advice I would offer on incorporation (i.e. general advice rather than specific to any one person's circumstances) is

i) to consider whether to hold all properties in a single Ltd or to split them across multiple companies (within or outwith a Group).

ii) think carefully about shareholders and classes of shares, especially if you are thinking of IHT and similar.

iii) Do not regard incorporation as a step that can be taken lightly. Seek professional advice based on a detailed understanding of your own circumstances and plans.

@David Price - ATED (Annual Tax on Enveloped Dwellings) is not due on any property where it is "let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner". https://www.gov.uk/guidance/annual-tax-on-enveloped-dwellings-reliefs-and-exemptions

Stop scare mongering about this. The ATED regime was brought in to stop SDLT and CGT avoidance more than anything else. As long as the properties are commercially rented out it has no effect.

Reply to the comment left by "Simon Lever" at "25/09/2015 - 13:03":

I am certainly not trying to scare monger I just interpreted 'Commercial' as commercial not residential - an interpretation shared by many of my colleagues.
I am sorry you are offended by my comments.

Hi Yvonne,

Why not sell the company rather than the house. You would pay capital gains on the shares at 28% and after you CGT allowance

Or you could sell the property and the company I think would get indexation relief and taxed at 20% (falling to 19% soon). You can then draw that out slowly or pay yourself a salary with it

I'm no accountants or tax adviser so you will need to research to confirm any of the above

Hi David

That is why it is better to get proper advice rather than guess.

Commercial means as in a business not as in commercial property. aS long as the letting of the residential, or retial, premises is done on a commercial basis and not to any connected persons the ATED rules do not bite.

Having said that every case is different and individual professional advice should be sought, as advised by john Pipllman