Property let through a Limited company (PSC)

Property owner wants to start a B&B business by forming a PSC

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A potential client with six properties wants to start a B&B business by forming a limited company. He will receive the market rent as a landlord and be responsible for repairs and expenses.  The advantage to him is that he does not have to take out more income than he needs.                                                                                                   I personally don't see any issue with this arrangement but am keen to hear if HMRC has raised any issues with similar arrangements.

Replies (15)

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By David Ex
16th Apr 2024 11:45

I’ll have a read of your technical analysis if you can post it here.

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By Paul Crowley
16th Apr 2024 12:29

PSC?
What exactly is that?
What exactly is the concern?

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Replying to Paul Crowley:
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By David Ex
16th Apr 2024 12:33

Paul Crowley wrote:

PSC?
What exactly is that?

Similar to an SPV.

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Replying to Paul Crowley:
Stepurhan
By stepurhan
16th Apr 2024 12:48

Person of Significant Control. It does make sense that the person setting up the company for their own benefit would also be a PSC. :-)

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By ahsonu
16th Apr 2024 12:45

PSC-personal service company The concern I have is that HMRC will challenge the arrangement and will try to treat B&B income as his personal income instead of the limited company income.

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Replying to ahsonu:
Stepurhan
By stepurhan
16th Apr 2024 12:50

Why do you think this is a risk?

With you providing so little detail, it is hard to judge if it is open to challenge or not.

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Replying to stepurhan:
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By ahsonu
16th Apr 2024 13:10

The risk is that HMRC teats this as a sham and treats all income as that of the individual.
The individual will get taxed on all his B&B taxable income and he may become a higher rate tax payer with his having any control over the timing of the income.

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Replying to ahsonu:
Stepurhan
By stepurhan
16th Apr 2024 13:36

ahsonu wrote:

The risk is that HMRC teats this as a sham and treats all income as that of the individual.

Last try.

You've stated what the risk is. You haven't stated WHY you think it's a risk. What about the arrangements leaves it open to be challenged as a sham? Whilst they may behave that way sometimes, HMRC do not actually have unfettered power to decide who gets taxed on income.

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Replying to ahsonu:
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By Paul Crowley
16th Apr 2024 13:15

That is exactly what I thought you meant.
How exactly will IR35 apply in this case? Could it be that the clients are all paid for by the local council, as in not really the type of B&B most people expect when they hear the word?

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Replying to ahsonu:
By JCresswellTax
16th Apr 2024 13:33

This is not a personal service company, think you need to rethink this part.

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By Tax Dragon
16th Apr 2024 13:26

If you want to defend against it being treated as a sham, make sure it's not a sham - get a lease in place, declare the gain on that disposal, set up a company bank account, advertise in the name of the company etc. Basically treat the company as you would if it was independent.

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By Postingcomments
16th Apr 2024 13:26

Out of interest, what kind of properties are they and are they close together?

I just have a vision of this bloke driving round town every morning and cooking a fry up in six different 2 bed terraces.

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Replying to Postingcomments:
paddle steamer
By DJKL
16th Apr 2024 13:40

Use one of trailers you see at the football-tow it around???

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VAT
By Jason Croke
16th Apr 2024 14:41

I think the key phrasing here appears to be the clients desire to determine when they receive income from their PSC....the only people who would want to time when they get paid are those who are higher tax rate payers wanting to game the system a little by delaying their income....if this were sole trader income it is more difficult to defer, whereas the PSC could decide when or if dividends are paid.

I suspect that is where the OP's discomfort is arising from.

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By FactChecker
16th Apr 2024 14:45

None of this (as stated above anyway) makes any sense.

"He will receive the market rent as a landlord and be responsible for repairs and expenses. The advantage to him is that he does not have to take out more income than he needs."
- if he (the individual) receives market rent, then what is the income that he doesn't have to "take out" (and from where)?

EDIT: crossed with Jason's post ... so is OP meaning to say that "he" is the PSC?

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