Saving Tax with a Property Company

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A Tips & Advice Special Report about...

In a nutshell

Using a company to own and let properties can be a very powerful tax planning tool in the right circumstances. This Special Report covers the key motivations for using a property company plus the tax-saving opportunities that come with it.

In detail

Although a property company is not the magic solution that will fix all your tax issues, it can be a rewarding option, provided you’ve fully explored all the options. This Special Report is the perfect starting point to help you make an informed decision. It explains:

• The different possibilities for property related businesses
• How the tax works for unincorporated letting businesses and property letting companies
• How rental profits on properties owned by a company are taxed
• The tax advantages and disadvantages of personal versus company ownership
• How to get your property company up and running
• What you need to consider when using a property management company alongside an unincorporated letting
business

This Special Report explains the circumstances where there is a tax benefit to using a company. All the advice will help you decide whether to invest in property, which ownership options to go for and the tax deductions you can safely benefit from.

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We've created this Tips & Advice Special Report especially for... 

Professional and amateur property investors that want to:

• Get to grips with the property ownership options
• Understand the tax implications of using a property company

Advisors that want to:

• Provide sound tax-planning advice for clients who are interested in using a property company

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You'll get the following free extras with this Tips & Advice Special Report... 

An online service with ready-to-use documents

• To immediately apply our advice and solutions in practice
• That you can easily adapt to suit your own requirements

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In this Tips & Advice Special Report you'll read about...

Introduction

1. Overview of different property-related businesses

1.1. How can property be used to make money?

1.2. What if my business carries out several functions?

1.3. How is a letting business treated for tax purposes?

1.3.1. Income tax

1.3.2. CGT

1.3.3. IHT

1.4. How is a property management business treated for tax purposes?

1.4.1. Income tax

1.4.2. CGT

1.4.3. IHT

1.5. What about occasional gains realised on property disposals?

1.6. What happens if HMRC says that I am trading in property?

1.7. What is the furnished holiday letting status?

1.7.1. What qualifies as an FHL?

1.7.2. What if the conditions in a particular tax year aren’t met?

1.7.3. Period of grace election

1.8. Conclusion

2. Taxation of rental income: holding personally

2.1. I am about to start letting a property, how will I be taxed?

2.2. How do I aggregate the rental income?

2.3. What if I have a big portfolio?

2.4. What expenses can be deducted?

2.5. Isn’t there a simplified deduction now available?

2.6. What about the cost of, say, building an extension?

2.7. Can I claim capital allowances for tools?

2.8. What are the special rules relating to mortgage interest?

2.9. How do I claim relief now?

2.10. Is it just a straight deduction at 20%?

2.11. Once I’ve worked out the profits what do I do?

2.12. What rate of tax is charged?

2.13. What about National Insurance?

2.14. What if I make a loss?

2.15. What if I sell a property?

2.16. Conclusion

3. Taxation of property income: holding via a company

3.1. How are property letting companies charged to tax?

3.2. How are taxable profits calculated?

3.3. How does a company report and pay the CT?

3.4. What about when the money is paid out?

3.5. Conclusion

4. Personal v company ownership

4.1. What are the main tax advantages and disadvantages of usinga company?

4.2. Are there any non-tax benefits to using a company?

4.3. Will there be tax savings with only modest rental income?

4.4. What about higher rate taxpayers?

4.5. What if the property income is higher?

4.6. Can I save tax by sharing my profits?

4.6.1. What can I conclude from these comparative calculations?

4.7. How do the rules regarding interest relief benefit companies?

4.8. In what circumstances is using a company to let property ideal?

4.8.1. The property company as a retirement fund

4.8.2. The family investment company (FIC)

4.8.3. What can be concluded from these case studies?

4.9. Conclusion

5. Getting the property company up and running

5.1. How do I set up a company?

5.2. I want to put my existing portfolio into the company. How do I do this?

5.3. Isn’t there a relief for transferring a business to a company?

5.4. Can I claim this relief?

5.5. How can SDLT apply when no money is changing hands?

5.6. What rates does a company pay?

5.7. What is multiple dwellings relief (MDR)?

5.8. Is it possible to avoid SDLT by using a partnership?

5.9. So can I just form a partnership, then incorporate it to avoid the SDLT?

5.10. I want to start from scratch, how do I fund the company?

5.11. What if I borrow to lend money to the company?

5.12. What if I borrow and invest in share capital?

5.13. Conclusion

6. Using a property management company alongside an unincorporated letting business

6.1. What is a property management company?

6.2. What level of fees is appropriate?

6.3. Do I need to get a formal contract drawn up?

6.4. Won’t I just pay tax when I extract the profits later on?

6.5. Can I just liquidate the company then repeat the process every few years?

6.6. Conclusion

7. Appendices

7.1. Conditions for BADR

7.2. HMRC’s guidance on trading company status

8. Documents

8.1. Election to average occupation of FHLs

8.2. Election for a period of grace to apply to FHLs

8.3. Election to opt out of rental cash basis

8.4. Dividend checklist

8.5. Flow chart - forming a limited company

8.6. Interim dividend board minute

8.7. Dividend voucher

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