What are the issues with free rent to limited co?

Directors/shareholders own it personally

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Scenario - 2 brothers 50/50 shareholders and directors of Limited Company.

They personally inherited some land 50/50. The company uses the land for trading activities and the directors do not make any rental charge to the limited company for the use of the land. Related party transaction note is in the limited company accounts to show nil rent charged.

Are there any issues that will arise from this in the present, other than capital gains tax/ER relief down the line?

So the company gets free rent, no rental expense and relief and the directors charge no rent and have no rental profits declared.

Many thanks

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By Matrix
24th Apr 2019 15:55

The main issue is that it is not efficient for tax purposes, given the differential rates of tax on dividends and rental profits. You have all the facts so advise them on the optimal extraction of profits, why are they not charging rent anyway?

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