second limited company for commercial property?

Should we buy our commercial office via our current ltd co or set up a second ltd co?

Didn't find your answer?

Hi, my husband and I are 50:50 owners of our current limited company and we are buying a commercial office space through our business. We have a meeting with our mortgage offer providers on Monday, but during the call to organise this meeting there was a suggestion that it might make more sense to set up a second limited company to own the office and lease the space to the current trading company. The pros explained appear to be a separation of the asset from the trading company protecting it from any future issues should the trading company be sued or should we wish to sell the trading company and easily retain the office asset. Really I'm just hoping for some top line help on the cons? Or watch outs? Thanks in advance!

Replies (7)

Please login or register to join the discussion.

By Tim Vane
25th Jan 2020 15:17

I would have hoped that your accountant would have already advised you of the major implications of the transaction and discussed the relevant tax planning options. If you have not yet run this past them then make sure you speak to your accountant both before and after the meeting and before making any decision. There are a number of wider aspects to consider beyond the individual transaction and only your own accountant will have enough of the background information and your future plans to advise.

Thanks (1)
Replying to Tim Vane:
avatar
By LeonieRandles
25th Jan 2020 15:56

Thanks - up until now I've managed to cover my simple small company accounts filing and day to day myself, so this has really confirmed that we are likely to need to seek proper advise on the set up here. Appreciate your time, thank you

Thanks (0)
paddle steamer
By DJKL
25th Jan 2020 16:15

I will reiterate the other comments- things like what you will finally do with property if later say retiring/selling trading business , finance needed, vat ,will all have a bearing on where you now place the property and why- property can be tricky and expensive to move owner if you later have a need for it to be in a different ownership so front end advice considering myriad factors will likely be useful; the choice you do make may well involve trade offs re future flexibility so advice now could really pay for itself not only now but ten twenty years later.

Thanks (0)
avatar
By Comptable
25th Jan 2020 16:31

I agree with the other answers.
You should probably also look at the pros and cons of owning the property through a Limited Liability Partnership.
And I do mean pros (of which there can be quite a few including greater flexibility in the future and also succession planning) and also the cons (which are mostly about income tax).
You do, as others have said need to talk all of this through with someone who understand the range of possibilities.

Thanks (0)
avatar
By Montrose
25th Jan 2020 18:38

Just something else to bounce off your accountant. It can be advantageous in some cases to use an SIPP or an SSAPS to acquire commercial premises to be occupied by your business, which can give you a tax break on the acquisition costs and allow you to pay tax deductible rent to your scheme in which it will be free of tax.
This can be especially advantageous if you have to improve the premises before you occupy . Carefully structured arrangement can allow you to enjoy a tax break for your business on the improvement costs by using the "Lease Premium" rules together with an early break clause in your tenancy agreement. The definition of improvement costs is somewhat esoteric, but your accountant will be able to guide you

Thanks (0)
Replying to Montrose:
paddle steamer
By DJKL
25th Jan 2020 21:13

But, beware lower value properties in things like SIPPs as the fixed fees some providers charge, and some of the additional hoops and costs you may incur both on purchase and on later sale , plus annual running costs, can make serious inroads into returns that the property might have made outwith a SIPP.

A SIPP can be great but if a £50,000 property has an annual property charge of say £600-£700 and purchase and sale fees at say £1,000-£1,500 (plus all the more normal legals as well) and where all works tend to need three quotes to be submitted, and they ask for additional reports on purchase that you know are a waste of money , then they can become very frustrating- have been there and got the T Shirt.

Thanks (0)
chips_at_mattersey
By Les Howard
25th Jan 2020 19:37

Seek advice on VAT and the option to tax. The answer will depend on whether you pay VAT on the purchase of the office space.

Thanks (0)