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Using limited company funds to buy property?

Hi everyone,

I was hoping for some advice on investing funds from a limited company...

The main business of the company is IT consultancy, the business has built up funds over the years which the director wants to leave in the company as any further dividends he takes will exceed his ÂŁ40k threshold & therefore be taxable at 25%. Essentially the director wants the company funds to work better than sitting in a 1.5% interest account.

So is it advisable in this situation for the director to invest the funds in buy to let property (no mortgage required). Understand that Tax will be payable on rental income and also CGT if the property is sold, a secondary hit will be taken when the director eventually withdraws company funds or closes the company down. Are there any other pitfalls with this option to make it not advisable?

Thanks in advance!


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06th Dec 2012 22:43

Have you thought about pension contributions?
Have you though about a SIPP?

Director could probably still get a significant sum into the pension using his carry back allowance. After a few years it could buy a commercial property.

Tax relief on contributions. No tax on rental income / gain. Provides for his retirement. Potentially outside of estate. Pension can also loan funds back to company if ever needed. Can be drawn (25% lump sum tax free) at 55.

I know that some dont like the thought of putting money to one side, but there are also dangers of leaving to much in the bank of companies.

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07th Dec 2012 07:36

zeofiles has alluded to it ...

... Entrepreneur's Relief could be jeopardised if the property is held in the otherwise trading company. Watch BPR as well.

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