Land Purchase and House Build

Can you use a ltd company to purchase land and build house to live in?

Didn't find your answer?

Can a Ltd company director use his company to purchase land and build a house on, which he can then either rent out to himself or somone else, or go and get a personal mortgage and buy back from his own ltd company?

Replies (32)

Please login or register to join the discussion.

avatar
By Tax Dragon
24th Oct 2019 23:55

Can? Presumably if it has (or can obtain) the funds, the planning consent and so on and if there are no legal obstacles or constitutional problems (constitution of the company, I mean) then I don't see why not. Do you foresee an issue?

Thanks (0)
avatar
By paul.benny
25th Oct 2019 07:57

There are few accounting or tax rules that would prevent the scheme you mention. Whether it's wise or tax efficient is another question, which very much depends on the detailed facts.

I presume for this hypothetical scheme you will be using and paying for an architect rather than relying on an internet forum. You should also spend a few hundred pounds getting proper tax advice. I will tell you for free, though, that there are no clever wheezes that will let you have tax-free money from your company.

Thanks (1)
By JCresswellTax
25th Oct 2019 10:14

Yes

Thanks (0)
Replying to JCresswellTax:
avatar
By Tax Dragon
25th Oct 2019 10:36

Not if you interpret "a" as "any" (or "every"), as (IMHO) prudence dictates, in the absence of facts.

Thanks (0)
Replying to Tax Dragon:
By JCresswellTax
25th Oct 2019 15:02

I put as much thought into my reply as the OP put into their post.

Thanks (2)
By ireallyshouldknowthisbut
25th Oct 2019 10:32

All of that is perfectly possible.

As a tax payer, I would say "go for it!"

Thanks (1)
Oaklea
By Chris.Mann
25th Oct 2019 10:49

Fingers crossed that you already have an accountant?
Fingers crossed, once again, that he's been involved in the; formation and ongoing well-being of your said limited company?
All's good in the world then?
It would be foolish, nay downright silly, not to keep your accountant fully informed as to your next project.

Thanks (0)
avatar
By David Heaton
25th Oct 2019 12:21

You can, but it might cost you more money than you expect, not to say reams of extra paperwork. The company will have to operate the CIS when paying subbies. The company will make a profit on the build - land plus build costs will almost inevitably be less than market value of the new house - which will not benefit from PPR relief. If the company sells the house to the director at cost, he will be taxed under Schedule E on the difference between that and market value, because the difference is an emolument/earnings (he's buying an asset from his employer that he can sell immediately for a profit). He will also pay SDLT that wouldn't be due if he built the house as the owner. It's not immediately attractive as a plan, but as others have said, it all depends on the detailed facts. Think also about the VAT aspects, especially if the company is building to rent ...

Thanks (0)
avatar
By andy1981
26th Oct 2019 12:36

Apologies for the lack of information in the initial message, and thanks for the subsequent answers.

There are a few possible scenarios that I can think of....and lets assume that you actual have the funds within the company with no need to loan.

1) Can you purchase the land with your ltd company and fund the house build then either buy the house from the company or leave within the company and rent it to yourself?

2) Can you purchase the land with your ltd company and then self fund the house build, keeping the house and land separate? If so, does the company then effectively become nothing more than a leaseholder as you own the house personally?

3) What are the advantages / disadvantages of either method?

Say for example, once the house its built, you decide to then get a personal mortgage to buy the house from the company, do you buy the house at the price it has cost the company or would you have to have it valued first and then buy at the higher price? surely not?

Is there a better way of doing this by utilising the companies funds to purchase land and build house?

Thanks for all your previous answers, very kind of you all to take the time.

Thanks (0)
Replying to andy1981:
paddle steamer
By DJKL
26th Oct 2019 14:09

Are you also getting the drawings/plans/warrants etc for the house via an internet forum?

Go to an accountant, go directly to an accountant, do not DIY, do not collect a problem.

Property to live in yourself with companies has more red warning lights than the average , get this wrong and the one bit of actual advice I can offer you is it will be expensive.

Thanks (0)
RLI
By lionofludesch
26th Oct 2019 14:32

I like the idea that a director would rent his own home from his company so that he could pay tax on the rent voluntarily.

If only every director would do this. Then the rest of us need pay no income tax.

Thanks (0)
avatar
By andy1981
27th Oct 2019 08:53

Once again, thanks for the replies.

I fear that I have confused some of you, unintentionally, by trying to keep my original question rather to the point.

Let me put it like this. Consider the above scenarios, whereby the ltd company has enough cash to purchase the land and build the house (and or any above combination), and the land has already been granted planning permission, the drawings have already been completed etc.

Im not trying to wing anything here, as some suggested, or undertake such a project without professional advice. And I already have an accountant before anyone politely suggests getting one. I like to do a little homework myself.

Thanks (0)
Replying to andy1981:
avatar
By Matrix
27th Oct 2019 09:15

Why though? What perceived savings do you see by doing this?

Thanks (0)
Replying to andy1981:
avatar
By Tax Dragon
27th Oct 2019 09:23

With respect, you are not doing homework by asking your question. You are asking professionals for answers.

That's exactly the thing that the same professionals have been bemoaning in the "sad" thread. Tbh, I think you've had some pretty decent responses.

Ok, so everyone has come at it from a tax and accounts angle and that wasn't your question. But this is a tax and accounts forum, so what did you expect?!

Thanks (0)
Replying to Tax Dragon:
avatar
By andy1981
27th Oct 2019 09:35

Tax Dragon wrote:

With respect, you are not doing homework by asking your question. You are asking professionals for answers.

That's exactly the thing that the same professionals have been bemoaning in the "sad" thread. Tbh, I think you've had some pretty decent responses.

Ok, so everyone has come at it from a tax and accounts angle and that wasn't your question. But this is a tax and accounts forum, so what did you expect?!

I was reluctant to even begin this thread if im honest, especially if its seen as "sad" by yourself. I think I have had some great responses but hey ho.

All I wanted to know, from an accountancy point, was is it possible for a director of a company to build himself a house using the companies funds, rather than draw the said amount into a personal account, getting hit for the tax, then building the very same house.

If it is possible, then im sure there are varying methods of the most tax efficient way to do things......which i will then do my "homework" on. Not everybody likes to go into things blind do they?

Thanks (0)
Replying to andy1981:
avatar
By Tax Dragon
27th Oct 2019 09:49

"Sad" refers to https://www.accountingweb.co.uk/any-answers/accountingweb. Your failure to appreciate that shows exactly the issue that I have with you. You are here only for your own benefit. This site - any site like this - needs give and take. If everyone here was like you, there would be no threads, only unanswered questions.

Thanks (0)
Replying to Tax Dragon:
avatar
By andy1981
27th Oct 2019 09:54

Jesus christ. Im not an accountant. I came on here for advice because it seemed like a great place to do so. I suggest that you go and tuck yourself back up in that bed, and try getting out on the other side. Its not even 10am so you have plenty of time.

Thanks (0)
Replying to andy1981:
RLI
By lionofludesch
27th Oct 2019 10:16

andy1981 wrote:

All I wanted to know, from an accountancy point, was is it possible for a director of a company to build himself a house using the companies funds, rather than draw the said amount into a personal account, getting hit for the tax, then building the very same house.

If that's all you wanted to know, of course it's possible. You should've specified that you just wanted a "Yes" or "No" vote.

Why you seem to be so peed off by folk offering you additional advice on the pitfalls of the scheme is beyond me, though.

Thanks (0)
Replying to andy1981:
ALISK
By atleastisoundknowledgable...
28th Mar 2021 08:03

andy1981 wrote:

<

All I wanted to know, from an accountancy point, was is it possible for a director of a company to build himself a house using the companies funds, rather than draw the said amount into a personal account, getting hit for the tax, then building the very same house.

Yes

andy1981 wrote:

<

im sure there are varying methods of the most tax efficient way to do things......

Not any that would be recommended. It’s like choosing the tird that you’d most like to eat.

Thanks (0)
avatar
By Wanderer
27th Oct 2019 09:17

Speak to an accountant and make sure you cover:-
1. Benefits in Kind.
2. Annual Tax on Enveloped Dwellings.
3. Value Added Tax.
4. Stamp Duty Land Tax.
5. Capital Gains Tax.
6. Construction Industry Scheme.
on top of the various other points alluded to above.

Thanks (1)
Replying to Wanderer:
avatar
By andy1981
27th Oct 2019 09:42

Wanderer wrote:

Speak to an accountant and make sure you cover:-
1. Benefits in Kind.
2. Annual Tax on Enveloped Dwellings.
3. Value Added Tax.
4. Stamp Duty Land Tax.
5. Capital Gains Tax.
6. Construction Industry Scheme.
on top of the various other points alluded to above.

Many thanks wanderer

Thanks (0)
avatar
By andy1981
27th Oct 2019 09:43

All I wanted to know, from an accountancy point, was is it possible for a director of a company to build himself a house using the companies funds, rather than draw the said amount into a personal account, getting hit for the tax, then building the very same house.

If it is possible, then im sure there are varying methods of the most tax efficient way to do things......which i will then do my "homework" on. Not everybody likes to go into things blind do they?

Thanks (0)
Replying to andy1981:
avatar
By Tax Dragon
27th Oct 2019 09:51

What stopped you asking your accountant the question?

Thanks (0)
avatar
By andy1981
27th Oct 2019 09:56

He is away on annual leave. I dont like to bother people when they are on holiday thats all.

Thanks (0)
Replying to andy1981:
avatar
By Tax Dragon
27th Oct 2019 10:02

What, and a house build can't wait two weeks?

Thanks (0)
Replying to andy1981:
avatar
By whitevanman
27th Oct 2019 10:33

As others have said, this is a site for accountants / tax professionals. The problem with posts such as yours is very easy to explain.
You ask "Can I do this". The first reply answered that fully but of course is not what you wanted to know (at least not all). So, you then return with other questions like "how do I do it and what are the pitfalls". Also, when you encounter resistance of any sort, you clearly don't like it "JC etc" (which some might find offensive).
The point is, this is not a site for people to get free advice (whatever the reason). It is a site that provides mutual assistance for professionals.
The answer to your question is that almost anything "can" be done. Also, for something such as you refer to, there are probably at least 10 different ways of doing it and each has it's own merits and risks.
A professional will be able to advise you based on the facts and it will probably take some time and a lot of work.
I assume you don't want to build my house for nothing. Please don't expect me to give you all this valuable, professional advice for nothing.

Thanks (0)
avatar
By andy1981
27th Oct 2019 10:17

Thanks for all your help for those who took the time to reply.

I understand that i may be asking for simple answers to a complicated question, but i didnt realise that until Ive read your replies. An internet search brought me to this website, nothing more, and I certainly didnt expect to annoy anyone or cause ill will. I thought it was just a site where you could post your accountancy questions. Maybe ive got it all wrong. Apologies.

Thanks (0)
Replying to andy1981:
avatar
By Tax Dragon
27th Oct 2019 10:35

Let me ask you a simple question. What do you think the tax position might be if a company did the director's shopping for her. Or him. Or...

Or what if the company bought the car but the director paid for the fuel? Would the company then only have a leasehold interest in the car? What would happen then if there was an accident? Whose responsibility is it to insure the car - the company because it bought it, or the director because s/h/e/tc put the fuel in?

And these are all far simpler situations. Property law is a library in itself. Actually, as I hinted in the very first reply, you could add talking to a property lawyer to you homework, while your accountant is away.

Thanks (0)
avatar
By andy1981
27th Oct 2019 10:53

TD, I totally get what your saying and I can see how very quickly things can become very complicated
Can you recommend a property lawyer who I could talk to? I dont know whether your allowed to post such information on here so any help, as always, is greatley appreciated.

Once again, thanks for your help, Ill take your advice kindly, along with everyone else.

Thanks

Thanks (0)
Replying to andy1981:
avatar
By Tax Dragon
27th Oct 2019 11:05

You've slightly undermined my next point by being polite! :-)

There are good property lawyers in my neck of the woods. That might not be of any use to you. It's worth a face-to-face.

Thanks (0)
avatar
By Tax Dragon
27th Oct 2019 10:59

And this, ladies and gentlemen, wolves, lions, dragons, cats, penguins, pigs, DJKL and everyone else.... this is why we should shake on the proposal (see "Sad") to trial ignoring posts from first time posters, Unjustified Anonymous and Joe and Jenny Dumb.

These OPs can't take good advice.No-one benefits from getting involved. It ain't worth the effing effort. And the site goes in the wrong direction.

Thanks (0)
Routemaster image
By tom123
28th Mar 2021 07:54

My first question is always

"what taxes are you hoping to avoid by following this route"?

Because - if you didn't have that as a thought, why would you bother?

My answer would generally be:

"you may avoid that particular tax, but what about all these others"

Plus, if something looks too good to be true it usually is.

Thanks (0)