Leasing premises to your Ltd

[perplex]

Hi,

We own a building that is currently being run as a retail business by a company and their lease is expiring and we have served a notice as we want to run the business ourselves and not renew their lease.

Anyway, we will be incorporating but just wanted to know if it would be a good idea of getting money out of the company by leasing the building to the limited company?

I know this would be a tax deductable expense for the company, however, what would be the difference between doing this and having a higher salary to make up the difference? as the property rental income going to the director will be taxed by Income Tax.

Thanks.

 

[KM-Tiger]

You need to consult your accountant.

I don't think you will have any choice but to lease the building to the company (or a licence to occupy) and I believe HMRC have rules about rents not being significantly under/over value.

 

[perplex]

The last time we saw our accountant he said it's a good way of getting money out of the business too, so I guess we'll be doing it.

He did mention the point about it having to be market rate.

 

[Homshaw]

I think you need to take new advice on this point

Under the old CGT regime it was possible to take a salary and still qualify for the 10% tax rate.

Under the new Enterpreneur's Allowance taking a commercial rent means you can not claim the lower tax rate. Any gain would be 18% instead of 10%

Extra salary is an expensive way of paying yourself. If you're a standard rate taxpayer the employers NI, employees NI and tax come to about 44%. A bigger share of the divi's would be better. You may need a separate class of share if there is an issue on control of the company.

It's a tough decision. You need advice based on your individual circumstances.

Tax Cafe answer questions for a reasonable fee

PS I have nothing to do with Tax Cafe. Just impressed with their books

 

[deniser]

We are aiming to do this as well when we find a freehold to buy.

The advice used to be to do this though a self invested pension scheme so that the trustees of the pension scheme hold the freehold rather than the directors but that was a couple of years ago and I don't know whether this still applies - worth investigating. This had considerable tax advantages.

 

[perplex]

We are aiming to do this as well when we find a freehold to buy.

The advice used to be to do this though a self invested pension scheme so that the trustees of the pension scheme hold the freehold rather than the directors but that was a couple of years ago and I don't know whether this still applies - worth investigating. This had considerable tax advantages.

Hi, mind elaborating on this further? Thanks.

 

[Zeno]

Hi,

We own a building that is currently being run as a retail business by a company and their lease is expiring and we have served a notice as we want to run the business ourselves and not renew their lease

I may just be reading this incorrectly however do you intend to remove the current occupiers of your premises (operating some kind of shop?) then take over the running of said shop yourself?

 

[perplex]

We are aiming to do this as well when we find a freehold to buy.

The advice used to be to do this though a self invested pension scheme so that the trustees of the pension scheme hold the freehold rather than the directors but that was a couple of years ago and I don't know whether this still applies - worth investigating. This had considerable tax advantages.

I just did some reading and it seems the only (obvious?) disadvantage would be short-term and that the rental income would be tied up in your pension fund which you can only access once you're 55 years of age. Thanks for the idea, I will do some more reading and ask our accountant.

I may just be reading this incorrectly however do you intend to remove the current occupiers of your premises (operating some kind of shop?) then take over the running of said shop yourself?

That's correct. Is there a problem I'm missing? :|

 

[Zeno]

That's correct. Is there a problem I'm missing? :|

Yes, a very big one. The business is not yours to take over.

 

[perplex]

Yes, a very big one. The business is not yours to take over.

I understand what you mean, but in this case it's just a matter of starting up another one as it's a convenience store.

 

[perplex]

Does anyone have any new input on this issue?

(sorry to bump)