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Own property personally but rent through company ?

My husband and I are buying a buy to let property, projection of net income to be around £10k per year. We are planning to buy a few of these in the next few years, so considering the impact of tax given we are both higher taxpayers. I consulted an accountant on the structure whether it is better for company to own the property or us personally and was advised "You purchase property as an individual but set up a limited company to declare rental income/expenses through it. When you sell the property you will be paying capital gain tax as an individual owner. The fact that you are individual owner of the property doesn’t stop you from putting the rental income through limited company. " This sounds like a great option, just want to check how valid is this ? Does this stand up to HMRC scrutiny ? Any kid of deed, trust that need to be set up for this to be viable ?

Appreciate any advice.


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Was the accountant qualified by anything other than telling you he was? If not, why don't you go to a properly qualified (chartered certified, chartered ) accountant, pay  a proper fee for the advice, and rely on the advice? 

My guess is that you are trying to do this on the cheap.  Remember the saying , you get what you pay for? Would you really get an unqualified electrician to put wiring into your house, an unqualified mechanic to fix your car? That this Government allows unqualified, inexperienced, unregulated, uninsured ex-industry accountants to call themselves accountants and abuse the trust of the public, is an ongoing scandal. It does not mean that you have to fall into the trap of talking to them. 




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Gosh sounds bit harsh and

Gosh sounds bit harsh and more than what I ask for ! All I need was a confirmation that the idea is wrong, which I did suspect it is, hence the posting. FYI, the accountant is qualified (or at least the company they worked for is qualified).

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thanks for your advice though

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Perhaps not enough info in the question

Perhaps the accountant was advising that you let the property to the company for a nominal sum (enough to cover you own expenses, such as costs of borrowing) and the company then sub-lets the property for market rent. This leaves the profits chargeable at lower corporate rates and avoids the potential double charge on sale of the property. Some consider it to be an aggressive strategy but I have yet to see HMRC challenge it.

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Well you could appoint a company to manage the property

Or you could get a lawyer to draw  up some sort of declaration of trust, but that would involve shifting value...

Generally speaking the income follows the ownership.

Have you considered commercial property in your pensions funds?

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BKD, have you seen a lot of people using this strategy. What paperwork does this involve ? Should I set up a separate ltd company to admister this or use my current ltd consulting company & add my husband as a shareholder (I've already seen how messy it could be !) :)

Chris, what do you mean by shifting value ? Does HRMC accept this strategy ? Yes the idea of commercial property in pension fund is indeed an attractive idea, this would involve setting up a SIPP for us. At the moment we have not had a lot in pension fund to make this worthwhile but could do. And we have not looked into commercial properties a lot.

Many thanks for advice.


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I agree Chris

It would be wrong to let the property directly to a tenant and then try to treat the income as that of the company. But legally there is nothing to prevent the individual letting to a company, which then in turn lets to end-tenant.

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I would keep things clean

And use a separate company. All you need is a competent lawyer to draft the lease agreements.

I don't see so many these days. At one point, when Gordon Brown mistakenly (IMO) introduced a £10k 0% band for companies, there was a rush to set up such companies. Now, the savings are marginal and you need to consider the compliance costs of running a company (which is one reason why you might want to use the existing company).

But we're reaching the point where you really need to sit down and speak to an adviser of your own - my generosity extends only so far :)


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:) many thanks for your input, BKD.

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You now need to do the numbers, which in turn will depend upon your age and expectations as well as availability of tenants and properties. How long do you expect to be in HR for, how many properties you can afford and so on.

It may well be easier and quicker to buy them direct, it all depends. Remember joint is 50:50  unless you opt to follow capital input, you cannot just allocate rental income.

If your in the north west feel free to contact us direct

Chris Smail

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Let's be blunt about this

The advice you got is wrong - you cannot do what this guy is suggesting. If you do and HMRC get hold of it you will be personally taxed on the income. And if you go on for several years before they catch up with you it will be really really painful to settle.

So - keep it simple - buy either personally or through a limited company. The question is which one.

If you are HR taxpayers and want to build a good sized portfolio of properties over a decent length term then that pushes you towards limited company. That's because the tax on the profits is a lot less, which means you will have more available to reinvest in further additions - so can build the portfolio more quickly. Pretty well all large landlords operate via limited companies.

But the problem with a limited company is that extracting the profits just puts you back where you started (as regards income) and makes you considerably worse off as regards profits arising on property sales. So what tends to happen is that limited company owners very rarely sell properties - they tend to hold onto them not only through their own lifetime but also into the next generation.

So, in general, my advice tends to work on the basis of : If you are going to have 5 or less keep it personal, any more (particularly if you want to build the portfolio quickly and don't need the income) go the limited company route.

But there is no "right" answer!

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Many thanks for your clear advice MBK ! I know what to do.



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Home Rentals: Yes it is the best option to avoide the high tax from HMRC. It is suitable to you that if you buy the house individually then you pay capital gain tax, and on this tax, low percentage is payable then the profit on income. So, I agree with your accountant decision. It is best for you .  

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Sorry to jump on someone else's question (I think the lady received complete answers), my wife and I are in a similar scenario, looking to buy our first rental property. She is a lower rate tax payer (40) I am HR. does it make sense to therefore both buy the property together (so we both get Cgt allowance on sale) but we together sublet it to just her, before subletting to tenants to take advan of her lower rate? Thanks for any advice.

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Jumping in

Hi, I am not an accountant but have encountered this situation myself. What we did was to purchase the property in joint names but with the ownership 99% to my wife and 1% to me. We then declared this to HMRC using Form 17. This is important as regardless of actual ownership HMRC will split income 50/50 for married couples unless you notify them. This allowed us to put 99% of the income to my wife and 1% to me. When we then disposed of the property we reverted ownership to be 50/50. We put 30 days between the equalisation of ownership and eventual sale. Strictly speaking not required but we did this to make the point that it was a real transfer of ownership. The advantage of this is that only a simple deed of trust is required to change ownership. Its trivial and you can do it yourself. The important thing is to tell HMRC at each step and ensure you receive a confirmation back from them that they agree with the action. We were investigated and needed to show all the documentation and even demonstrate that HMRC records were incorrect as we had their confirmation letters so be warned. In particular get the confirmation on the form 17. The onus is on you to keep the records. Best of luck!

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I am about to do something similar but am curious about the ownership split you have arranged.  Were you advised to keep 1% yourself for a specific reason or could you just put 100% in your spouse's name? 

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