Buying Property Under current LTD Company or create a new one?

[Ali123]

Hi all,

Just need some advice on this please.

We are thinking of buying a buy to let property in cash, due to family members giving this to us as a personal loan (so no interests).

I have a ltd company already which is seperate to the buy to let game, its different altogether.

But can the limited company own the buy to let property. How will this affect the accounts? As the cash i need to pay back to the family, this will therefore be a huge creditor on the accounts, will this bring the value of the company down? I am assuming the asset will however show on the accounts. So will this balance it. I dont want to scare off potential customers if they see a huge negative figure in the accounts.

Or, is it better to create a seperate LTD company that only deals with buying and selling of property (and putting it on rent). So far its only one property. But is it better to have it under a seperate LTD company? I am under the impression this may be better?

Can someone please advise?

Thanks

 

[Darren@dynamoaccounts]

There's too many variables to run through on a forum for this type of arrangement, by & large it depends on your personal circumstances as to whether it should be in a separate ltd company or your personally.

Normally, wouldn't go through your trading company unless you're business is located in the premises itself but by & large companies that own property tend to hive off into a separate entity in any case. I would recommend you have a chat with your accountant.

 

[Ali123]

Hi thanks for the reply.

I wouldn't have the buy to let property under my name personally.

It is between the current ltd company (if that is possible and not messy) or new ltd company just for this purpose of having a property owned.

To give you an idea, profit in the company from recent accounts (after all expenses, salary etc) was £10k.

The property is £95k. Will the company than be 95K in debt? will this bring the value of the company down?

If it does, i would rather open a new company?

Any advice?

Thanks

 

[Darren@dynamoaccounts]

The value of the property would be brought onto the balance sheet together with the value of any loan/finance. The interest on any loans would appear in the profit & loss account.

So the balance sheet would be quite neutral in that it has the value of £95k to be brought in as an asset but I presume you're borrowing the lot from family of £95k therefore the 2 will offset. Any equity that results from future valuations would then enhance the balance sheet.

Should also consider protecting the asset, what happens if the business fails, you lose the property? VAT implications, change in trading activity, there are a number of considerations that should be considered.

 

[Ali123]

Thank you for the reply.

The vat issue has crossed my mind.

Were not VAT registered at the moment. Is buying the property and if we were to sell it the same year, as its increases the turnover, would that mean we would have to be vat registered than. I thought property sales (buy and sell) were exempt from VAT? or is this not the case?

 

[Darren@dynamoaccounts]

If it's residential property it's exempt from VAT in any case. As it's not within your normal trading activities, wouldn't be included in the turnover figure when calculating if within the VAT threshold.

If commercial property, then could be worthwhile being VAT registered (possibly in a separate structure) but again there's a lot of variables to consider with the full facts to hand.

As you're not VAT registered, no VAT to charge.

 

[UK Contractor Accountant]

The question that really needs to be asked is why do you want the residential property in a Limited Company?

 

[STDFR33]

It may effect an ER claim in the future.

A discussion with an accountant is a must.