New business - advice needed

[T41J]

Hi there, appreciate any advice as I have just started my limited company to renovate property. It will start to incur costs including training course for plumbing etc as I will be doing the work myself. My question is this: if the company fails to secure funds, it will mean that I will have to pay upfront and buy the property in my name.
Can all the costs incurred by the company be invoiced to me with a small margin, so the company makes a small profit and I can then deduct the costs as expenses when I sell the property?
Is this practice okay or will it be disallowed by the taxman?
Thanks
JT

 

[Truemanbrown]

Firstly, do you need to set up a limited company to run this project. Unless you are an higher-rate taxpayer (I suspect you are, but it is worthwhile to ask the question), there is no major tax reason why you should run the project through a limited company.

Second, if the company cannot obtaining the mortgage, is there anything stopping you obtaining the finance and then making a loan to the company so that it can purchase the property in the company name.

If done properly, when the property is purchased by the company you will have a value of £x on one side of the Balance Sheet balanced by a loan to due to yourself for £x. You would ensure that there is a loan agreement in place concerning your loan to the company.

The company can then mirror the personal mortgage/loan that you have taken out by paying back the loan to yourself equivalent to the repayment that you have personally make. If that includes the company paying over interest then the company must pay the interest element net of basic rate tax on a quarterly basis. You would personally receive the income net of tax and would be shown as income on your personal tax return.

On the other side, you would be paying interest on the original loan/mortgage and you would be able to claim personal tax relief as long as the loan is a qualifying loan which is detailed in the link below.

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073791587&type=RESOURCES

 

[Williams lester]

This can be quite a complex area for tax purposes, and with the amounts normally associated with these sort of transactions, I would advise getting some proper professionsl (paid for) advice from your accountant before commencing trading.

 

[T41J]

Appreciate the advice ... thank you!