Profitable company wanting to buy an office

Profitable company wanting to buy an office

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A profitable limited company trading in the I.T. sector wish to purchase an office. Could I please have suggestions as to the best structure to achieve this. It is possible that a few years down the line the I.T. business/company could be sold but the 2 young single director/shareholders would want to keep the property.The directors are higher rate taxpayers.

Your comments would be appreciated.

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By duncanedwards
17th Sep 2014 18:43

Far too many imponderables to give any sensible advice.

If you are the "profitable limited company", I would speak to your advisers to get tailored advice on your specific circumstances.

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By Duhamel
17th Sep 2014 21:23

Two options
As Duncan says, there are many imponderables but two options to consider are owning the property through a parent company or the directors own it jointly and personally.

Both options keep the property separate from trading company so the company could be sold seperately. The best option really depends on personal and commercial circumstances.

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Replying to atleastisoundknowledgable...:
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By User deleted
18th Sep 2014 09:29

I would suggest ...

Duhamel wrote:
As Duncan says, there are many imponderables but two options to consider are owning the property through a parent company or the directors own it jointly and personally. Both options keep the property separate from trading company so the company could be sold seperately. The best option really depends on personal and commercial circumstances.

... rather than a parent company I would own in a seperate company, otherwise dividends would have to be routed through he holding company, any sale of the business would have to be through the holding company and it could make disposing of the property more tricky.

But as King_Maker says, if you have enough funds put them in a SIPP and let that buy the property as the capital growth will be sheltered from tax, and rent can be paid to reduce the trading company's CT liability (which would be tax free income in the SIPP). The downside would be if you sold/ceased the trading company any rent from letting to a third party would go to the SIPP and not the directors personally. 

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Replying to memyself-eye:
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By Duhamel
18th Sep 2014 09:16

Interesting

Old Greying Accountant wrote:

Duhamel wrote:
As Duncan says, there are many imponderables but two options to consider are owning the property through a parent company or the directors own it jointly and personally. Both options keep the property separate from trading company so the company could be sold seperately. The best option really depends on personal and commercial circumstances.

... rather than a parent company I would own in a separate company, otherwise dividends would have to be routed through he holding company, any sale of the business would have to be through the holding company and it could make disposing of the property more tricky.

But as King_Maker says, if you have enough funds put them in a SIPP and let that buy the property as the capital growth will be sheltered from tax, and rent can be paid to reduce the trading company's CT liability (which would be tax free income in the SIPP). The downside would be if you sold/ceased the trading company any rent from letting to a third party would go to the SIPP and not the directors personally. 

That's interesting, normally I would never recommend separate companies like that as you can't group relief losses from one to the other. I take your point though, sometimes practical aspects overule tax concerns.

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Replying to CJaneH:
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By User deleted
18th Sep 2014 09:36

What losses?

Duhamel wrote:
Old Greying Accountant wrote:

Duhamel wrote:
As Duncan says, there are many imponderables but two options to consider are owning the property through a parent company or the directors own it jointly and personally. Both options keep the property separate from trading company so the company could be sold seperately. The best option really depends on personal and commercial circumstances.

... rather than a parent company I would own in a separate company, otherwise dividends would have to be routed through he holding company, any sale of the business would have to be through the holding company and it could make disposing of the property more tricky.

But as King_Maker says, if you have enough funds put them in a SIPP and let that buy the property as the capital growth will be sheltered from tax, and rent can be paid to reduce the trading company's CT liability (which would be tax free income in the SIPP). The downside would be if you sold/ceased the trading company any rent from letting to a third party would go to the SIPP and not the directors personally. 

That's interesting, normally I would never recommend separate companies like that as you can't group relief losses from one to the other. I take your point though, sometimes practical aspects overule tax concerns.

As a property holding company it will only have profits from rent less interest, it would want a tenant repairing lease so the VAT could be reclaimed on repairs etc, but in a SIPP would likely be best.

Thinking about my earlier caveat, not an expert on SIPPs, but presumably if trading company sold and directors wanted rental income possibly they could rent the property and sub-let at a profit? Like I say not expert on SIPPs so that may be prohibited!

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Replying to Duggimon:
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By Duhamel
18th Sep 2014 09:49

Future losses

Old Greying Accountant wrote:

Duhamel wrote:
Old Greying Accountant wrote:

Duhamel wrote:
As Duncan says, there are many imponderables but two options to consider are owning the property through a parent company or the directors own it jointly and personally. Both options keep the property separate from trading company so the company could be sold seperately. The best option really depends on personal and commercial circumstances.

... rather than a parent company I would own in a separate company, otherwise dividends would have to be routed through he holding company, any sale of the business would have to be through the holding company and it could make disposing of the property more tricky.

But as King_Maker says, if you have enough funds put them in a SIPP and let that buy the property as the capital growth will be sheltered from tax, and rent can be paid to reduce the trading company's CT liability (which would be tax free income in the SIPP). The downside would be if you sold/ceased the trading company any rent from letting to a third party would go to the SIPP and not the directors personally. 

That's interesting, normally I would never recommend separate companies like that as you can't group relief losses from one to the other. I take your point though, sometimes practical aspects overule tax concerns.

As a property holding company it will only have profits from rent less interest, it would want a tenant repairing lease so the VAT could be reclaimed on repairs etc, but in a SIPP would likely be best.

Thinking about my earlier caveat, not an expert on SIPPs, but presumably if trading company sold and directors wanted rental income possibly they could rent the property and sub-let at a profit? Like I say not expert on SIPPs so that may be prohibited!

I was thinking more of the trading company and any losses it might make in the future.

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By King_Maker
17th Sep 2014 20:56

Or via a SSAS/SIPP?

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By User deleted
18th Sep 2014 10:51

I would be worried ...

... if it made losses given its profile, but the only income in the holding company comes from the subsidiary, that could be stopped!

As has been said the company and its accountant (if it hasn't got one, it needs one) need to sit down and do a long term plan. If the plan is to build a property portfolio then a holding company may be suitable, although you may want a holding company just to hold the shares, with the property company and trading company both as subsidiaries to give maximum flexibility, because you may want to sell the property portfolio but not the trading company, or sell both but to different parties.

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By Southbankdelboy
25th Sep 2014 15:56

SIPP, Separate company and other options

Thanks to all who have commented.

Using a separate company - if the funds are coming from the trading company might there be any complication with interest due to directors/shareholders being connected persons?

 

 

 

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