Setting up a company to manage my own properties – is it worth it ?

Hi Arwel,

You can only charge what HMRC deem reasonable costs to the management company dependent on area and going rates. Any more and they will assume you are hiding profit.

You also need to read our tax planning page and tutorial as you could be hampering yourself dependent on circumstances with future tax plans and incorporation. Please see >> https://www.property118.com/tax/

Hi Arwel,

As long as the company is limited it is a separate entity to the people that own the properties. Managing them at 15% of the rent would be seen as just at the margins of acceptability by HMRC.

But then you have the added costs of a limited company. You need your accountant to do a side by side comparison of tax liability under your existing system and then a projection as a ltd company managing them. You may find that after paying the additional accounting costs etc that there's not a lot left for dividends.

Hi Arwell

I agree with the points above, especially the 15% upper limit.

I would also add that unless you structure the company under an LLP structure you may invalidate an incorporation relief claim if you ever decide to transfer your properties to a limited company.

Please see >>> https://www.property118.com/optimal-tax-planning/91857/
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I charge 17% management fee, but offer full management including paying for all court proceedings. HMRC have never challenged this figure.

I am just about to start doing this also and was planning to go for 15%. I have written an agreement between myself and the new company which details each point that is covered by the management charge. I have also stated that from time to time there may be additional charges made over and above the management charge for additional work (re-furb organisation etc) The points on my agreement go far beyond what a high street agent offeres, so I don't see an issue with 15% or slightly more, but I am no expert!

Reply to the comment left by "Mark Alexander" at "30/04/2017 - 14:48":

Hi Arwen

I have done exactly this as part of a restructuring of portfolio ownership.

In my area some Agents charge as low as 8-9% but of course they achieve a markup in other ways. Everything else is chargeable and they markup any costs by 20-150% so the real fee is much more.

I have chosen to go with the lower rate suggested as a fully managed strategy, only costs that will be passed on are those that require repairs and renewals. Even then these will be passed through at cost.

In terms of Accounting costs I have agreed £900+VAT for necessary filing etc..

The accountant will everything

Hi Mark,

I'm confused re: LLP, I was under the impression that a Partnership registered with its own UTR and all members (including New Co) registered with HMRC? An LLP only adds additional layers of complexity and reporting requirements?

I have considered this option for my portfolio of personally held property as a method of reducing my personal taxable rental income. The 15% management fee quoted reflects what letting agents charge in my local area and I already do the vast majority of the management of my own properties anyway.
However, has this method of operation been fully explored as legitimate tax avoidance ? In my personal circumstances I would not be looking to manage any other property within this Ltd management company structure other than my own.

Reply to the comment left by "andy p" at "04/05/2017 - 16:05":

Hi

It's a strategy I've implemented as part of one of the excellent Tax Planning consultations offered on this site.

I've talked it through with my accountant and he's happy with it!

Ultimately you'll always have to take a view, very little in Tax is black and white.

Providing you manage the properties yourself, it is a legitimate option.

I suggest you book a session for Tax Planning, it's a good service and I would recommend it without reservation.

Thanks Ian, much appreciated.

Hi, i like this suggestion but have a query? Would you not have to pay VAT on the transaction, ie as a personal individual to your service company, which you would then pass on to HMRC?