reserve1960 Posted June 28, 2006 Report Share Posted June 28, 2006 Hi All, I have a number of rental properties that I am growing by remorgaging when equity has grown enough, then using equity taken to put a deposit on next properties. I do not intend to take any equity out for personal use. One of my friends has suggested that it might be more tax effective to setup a limited company? can anyone help? advantages / disadvantages etc etc. Thanks Link to comment Share on other sites More sharing options...
F-Prop Posted June 29, 2006 Report Share Posted June 29, 2006 Hi, I asked my accountant this just yesterday and the answer is no (for me anyway - your circumstances may be different) You would have to pay CGT to move them into a Ltd co. and that means a big bill for not much gain. Ask a good accountant for proper advice though Trevor Link to comment Share on other sites More sharing options...
plym77 Posted June 30, 2006 Report Share Posted June 30, 2006 I would have to agree. I am a Chartered Tax Adviser. On transferring any properties to a Limited Company you would crystalise any capital gains on those properties and therefore could end up paying tax on properties where you have received no proceeds. Additionally, even if you did sell the properties into the company there are further disadvantages - an possible double tax charge being one of them. Assume you sell one of the properties at a gain of £100,000. You would receive a little indexation allowance, but broadly you would be subject to a Corporation tax charge of 19% or 30%, depending on the annual profits of the company. Then, when you did decide to 'extract funds' the chances are that you would do this be way of dividend. Now if that dividend (when grossed up for 'notional tax') plus your other income in the year creep into the higher rate tax band, you would have additional tax to pay. At the end of the day, you may not need the money now, but you would eventually want to enjoy some of the profits of your efforts. There are other ways in saving a bit of tax, particularly if you are married. The above information is obviously basic and you would need to see an accountant really (which I can help with if required). I have provided the information above generally to give you a basic feel really. I hope this helps Plym77 Link to comment Share on other sites More sharing options...
Recommended Posts
Archived
This topic is now archived and is closed to further replies.