I have a potential new client who is in the catering industry, she wants to buy a retail unit for her business.
She will rent out the flat above the shop, she has other income from another source but wants to know if it is more tax efficient to buy through the Ltd company or personally. She will be getting a mortgage for about 60% and financing the other 40% through savings.
Any specialists in this area?
Thanks
-- Edited by Sage77 on Monday 14th of January 2013 01:07:22 PM
I am not a specialist by any means and I would advise getting professional help her accountant on this one.
I would say possibly through the company, as you will then have less tax to pay on the profit of the rental of the flat. Also she has to think about the Capital Gains Tax if she were to sell the property at a later date.
Please do not take this as the correct answer as I am not a tax specialist. This is only based on things I have learnt through my own rentals, I haven't got commercial rentals though.
Maybe Shaun will be on here to help you later.
Sorry I couldn't be of more help. Like I say get professional help it will make a difference to the end result!
My brain seems to have gone on strike today. Apparently it doesn't like Mondays anymore but I can't see what it's problem is as I abuse it just as much at weekends.
Unless one of the others comes on board with the definitive answer before me I'll come back to this one tomorrow as, as Amanda suggests there are quite a few things to take into consideration one.
Few questions in the interim.
Is the asset likely to appreciate greatly in value?
Will the director be charging the company rent on the asset?
Will this be owned by the taxpayer or their pension fund?
If sold would the profit be taken or rolled over into a replacement?
Do inheritance considerations need to be considered (Business Property Relief).
Would the flat be a normal or holiday let?
Will the taxpayer ever live in the flat as their main residence.
Your best bet really is to talk to an expert in this field as whilst I know know a bit there is still an awful lot that I don't and I would hate to lead you astray by missing part of the answer that still resides in that area.
You could always strap on a helmet, build some trenches and then post the same question over on Aweb.
The bad part about this is that the client could end up substantially worse off if the wrong advice is given and they would hold you responsible.
It might be a good idea if at all possible to try and push the client onto someone else for this advice so that you are able to stay clear of any fallout as a result of it.
Sorry that I'm pretty useless today, fingers crossed I'll be back to firing on all cyllinders again tomorrow.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Shaun is right there are lots of things to consider in all of this which Shaun has listed and there are probably a few more. Duck out and send your client to an accountant. I had to ask one recently about mine, its a real minefield.
I think it makes it more complicated the fact that it is commercial as well, and potentially premises for the client's business, so in effect its an asset to the business, but then as Shaun rightly says you have to consider the rent on the flat and the premises. Really this needs specialist tax help.
On second thoughts even though I do know a few bits and bobs even I'm going to back slowly away from this one as not only is it a real potential minefield but it's also a minefield that the government regularly moves the mines around in so today's good advice could be completely the wrong advice in the future... And the adviser as always will not be judged by the client on the quality of the advice applicable at the time that it was given but rather only the time of the clients loss.
one thing I will mention though, when the client does talk to an accountant about this as this is a commercial property (no longer available for residential properties) get them to ask the question about using a pension wrapper for the investment as it could be an extremely tax efficient approach to private rather than business ownership. (it may however not be available due to the mixed use but it doesn't hurt to ask).
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
