Is Limited Company the way to go?

Thanks for posting.

Just to add I have spoken to two accountants each with a good client base of landlords and own properties themselves. One thought limited co. was the best option the other thought without doubt personal ownership!

I found an article related to this on a tax website that mentioned something that appeared to be quite a unique concept to me;

Using a Limited Liability Partnership and having a Limited Company as one of its members. When the time comes to agree the shares of profit for each member of the LLP, after the end of its accounting period, each individual member can be allocated a sufficient share to cover his drawings from the LLP – that is, the money he takes for his own use – and the balance of the profits can then be allocated to the limited company, which will only pay tax on them at corporation tax rates – 20%, provided its share of profits is less than £300,000.

With a limited company as a member of the LLP, property ownership remains in 'personal ownership' rather than under a limited company ownership structure. And profits can be earmarked for future capital investment and allocated to the limited company member, where they suffer a lower rate of taxation and remain available to the business to fund growth.

Reply to the comment left by "Mic Singh" at "26/03/2014 - 17:12":

Hi Mic

I agree with one of the accountants who has advised you LOL

My strategy is documented here >>> http://www.property118.com/landlord-tax/

Finance is a major factor but even if it wasn't I'd still always go for sole trader for long term rent and hold strategies.

The LLP model is very interesting for people who don't need mortgages or operate on a higher level, i.e. large portfolio funding via commercial lenders or private banks who are better placed to consider complex tax structures. The problem with these is the cost of borrowing because there are no economies of scale associated with bespoke structured funding facilities.
.

Thanks for the reply Mark.

Having read your strategy would you still opt for sole trader status if you could not show paper losses every year? Even with continual refinancing I think the development would produce a healthy profit which would get taxed at income tax rates.

Also I guess if I have no wife then your strategy would not work for me either.

Reply to the comment left by "Mic Singh" at "27/03/2014 - 09:26":

Hi Mic

Affirmative to both of your points.

As you have already noted yourself, you may be able to pay less tax on profits retained in a limited company, HOWEVER, at some point those profits are going to be accessed by somebody, either you or your beneficiaries, and additional tax will need to be paid at that point.

I do concede that your circumstances are different to mine and you must, therefore, make different consideration. I would strongly recommend taking professional advice from a qualified and insured professional. My comments and guidance are offered in good faith but without liability as I am not insured to offer advice on such matters.

The advisers I use are a boutique firm of fully qualified accountants and experienced tax advisers who are also portfolio landlords themselves. Over the years they have saved me literally millions in tax and only charged me a fraction of what they have saved me. They specialise in advising property portfolio owners and high net worth individuals throughout the UK. I fully commend you to engage them.
.