Purchasing an Investments Property in LTD Company

Can I Purchase a Property through my Limited Company?

Yes. A limited company is a separate legal entity and as such is
entitled to purchase property subject to Directors and Shareholders
approval.

Below are the scenarios and taxation pitfalls in relation to purchasing a property

1. Tax on Income generated from Rental income is 25%, this will rise to 40% should the profit remain in company for more than 18 months. If you extract the profit you will be liable to up to 52% tax on the income.

2. The cost of the property cannot be written off against Profits. Income generated to build up funds in the company will be subject to 12.5% Corporation tax (in some cases a surcharge of approx. 7% will apply), therefore you have already paid corporation tax on the amount that you have in the company

3. Should you wish to live in the property a Benefit in Kind equal to the value of what the annual rent would be:

4. Capital Gains tax Should you sell your property any profit you make from the sale will be subject to Capital gains tax within the company, on liquidation of company there may be a further charge to capital gains on the same money if it is still within the company. This would also apply if you
   were transferring the property from the company to yourself.
5. Borrowings: In general, a bank will tend not to give mortgages out to limited companies unless there is a proven track record and a buildup of assets within the company.

Advantages of Purchasing Property through limited Company

1. It is easier to build up a fund within the company than it is personally, as Corporation tax is lower than Income tax.
2. The tax rate on Income relating to investments generated is lower Company 25% (40%) v’s Personal 52%
3. When you go to sell property, it may be possible to sell the shares in the company rather than the property in order to reduce Capital gains tax and stamp duty.

Summary

We would advise that you weigh up your options carefully before deciding to purchase a property through your limited company, the short-term access to company cash needs to be balanced with the long-term tax implications. Should you wish to arrange a meeting with one of our advisors please contact us.