Re: Buying Property Through Limited Company

Hardly a burden though.

How do you figure that out. When not a company you still get £7700 Cap Gain at 0%, investment property or not.

DF

Oops. Sorry, I thought he meant PRR, my mistake.

In article , PhilP writes

I own several properties with the same plan as yourself. I had a meeting with my accountant about 12 months ago and, whilst I cant remember the specific reasons, the cons outweighed the pros, and I have not done it.

I think the main factors were admin and lack of flexibility did not make it worth the savings.

In article , Ronald Raygun writes

Yes you do, but only the personal allowance.

Not for a close investment company

OK, but companies don't pay CGT as such, do they? To them, a capital gain realised would be taxed as ordinary profit, wouldn't it? So, for a modest-sized company, the gains tax rate ceiling would be 19% (marginally 23.75%).

The owner, if in danger of becoming a HRTP if the whole loot were paid out as dividends in one year, could leave part of the money in the company and spread the dividend over several tax years to escape the extra 25% dividend tax.

The snag with owning investment property in a LtdCo (as opposed to a commercial property used in the course of a business) is that not only will the LtdCo pay Corp Tax on the profit on sale but if you then sell the shares or wind the company up you have to pay personal CGT = double taxation.

In message of Thu, 25 Sep 2003, john boyle writes

Not really, because you pay dividends out until the Revenue Reserves are all paid out as such. Then the shares are worth next to nothing if there are no assets left.

DF

Eh? Explain, please.

I set up a company and am the sole shareholder and the share capital consists of one fully paid up share of one pound. I personally lend the company £100k which I've managed to raise by hook or by crook. The company now uses its £100,001 to buy an investment property. All the income from the venture, after expenses, I take as dividends.

I sell the property for £200,001 and repay myself the £100k loan. The company has made £100k profit and pays CT of £19k. At this point my £1 share is worth £81,001. I pay myself £81k as dividends, over the course of 3 tax years, thus avoiding income tax assuming I have no other income. At this point my £1 share is worth £1. I wind up the company and get my £1 back.

Where's the double taxation? Obviously I'd be a fool to ind up the company before paying myself as dividend what the company is worth.

In message , David Floyd writes

You can only pay divis from distributable profits. Divis are taxed. There is not ACT anymore.

And after CT.

Which are taxed.

Look at my exact words

So you've no other income? The OP was using this as an extra income. I did use the word IF.

In message of Fri, 26 Sep 2003, john boyle writes

We ARE talking about distributable profits in this thread.

Slightly wrong. We were not talking about ACT. Dividends are regarded as already taxed in the hands of the recipient. If the grossed up dividends (at 10%) takes the recipient into higher rate then further tax is due (I won't go into the way it's calculated now). So with careful planning a large company profit (in the form of a Capital Gain - which makes no difference for a ltd co) can be distributed over this and future years without any further tax payable.

DF

In message , David Floyd writes

ER, thanks for that. You are, of course, quite right I was merely pointing out that if wanted to realise his profit in one go then it could end up rather tax inefficient. Of course there are ways round it, but it isnt as simple as the original poster may have realised.

There is something nagging away in the back of my mind about the way you described of distributing the residual profit as income over a number of years when the underlying company has ceased trading and is just a shell. I cant find what it is but will let you know.