Purchasing a warehouse - accounting question

[samuel5]

Hi all,

I'm purchasing a warehouse for my limited company but my accountant has advised me to purchase it in my personal name and rent it out to my limited company.

He is on holiday at the moment so cannot ask him but are there tax benefits doing it like this?

I will have to draw out the money from the limited company as a dividend and then get taxed 45% on top!

Thanks

Sam

 

[benb]

I assume your accountant is talking about a sipp?

 

[samuel5]

Not sure - what is a sipp anyway please?

 

[Talay]

I assume your accountant is talking about a sipp?

If you are buying a warehouse, are pulling out over £150,000 a year (derived from your paying 45% tax answer) and your accountant has not even explained what a SIPP is, I might be giving my accountant a permanent vacation !

 

[Tony King]

One benefit ( because we do it) is that the building is not owned by the company - and you can pay 'rent' to yourself at any amount you like (be reasonable though) - and the asset is untouchable.

we use ours as a pension funding method - your accountant will be able to advise on this.

 

[Talay]

One benefit ( because we do it) is that the building is not owned by the company - and you can pay 'rent' to yourself at any amount you like (be reasonable though) - and the asset is untouchable.

we use ours as a pension funding method - your accountant will be able to advise on this.

Except that the accountant seems to have bypassed this chapter !

 

[jamjam11]

Tell me guys if you do this, Surely thats looked upon as a second income, Renting something that You own under your name and renting it to your company.

I just starting to look into accounting etc, Mind blowing stuff. lol

 

[Tony King]

The building is owned by our pension fund - our accountant sorted all this out.

 

[jamjam11]

I trying to find a good account, Someone from here sent me a message looking 65.50 a month to register me an incorporation which will provide London address I'd have to pay more for some sort of 3rd party software for doing my accounts and they'd take care of the yearly accounts with HMRC.

Some people have a set and think your a dump ass, jsss 786+ VAT yearly for services i don't need, Dearest bookkeeping i've found to date.

 

[pentel]

Owning your warehouse in a SIPP would be advantageous from a tax point of view. However be aware that taxation of property or other assets in a sipp are entirely down to the whims of whichever government are in power. (Which is also the case for holding assets outside of a sipp) The difference is that once assets are in a sipp then extracting either the value or the asset is not simple.

I am sure someone will say that the rules are changing so that you will be able to take all of your sipp and pay the tax. If this goes through it will be a major improvement, but from my experience the rules change at least every 5 years. Would anyone like to guess what the next changes might be?

It all depends how much you trust politicians.

 

[Talay]

Potential exit for those going expat is QROPS (but no current reduction from £20k to £12k guaranteed pension for QROPS/expats) if moving to country with zero / low income tax and / or no tax on capital where it was raised over 12 months previously.

 

[Talay]

..I am sure someone will say that the rules are changing so that you will be able to take all of your sipp and pay the tax. If this goes through it will be a major improvement, but from my experience the rules change at least every 5 years. Would anyone like to guess what the next changes might be?

It all depends how much you trust politicians.

This is the big banana !!!

Gordon Brown screws with the dividend reclaim on pensions virtually destroying a whole industry and millions of pensioners' futures.

Planned to retire at 50 and bang, they change it to 55. Old age pensions are already 67/8 and may well have to go past 70 (but political bombshell) but the disconnect between personal pensions at 55 and an old age pension may well close.

QROPS reporting was non existent, then 2/3 years, then 5 years, then 10 years ?

ISAs - very good news up to £15k per annum but with any social help discontinued after a static £16k, many people will need to dip into it.

House prices - lunacy of planning laws and allowing land banking / overseas ownership without tax penalty means you need a million plus for a house in the south and you can buy a whole street for that in the north east. The greater rise in house prices the less you can save for pensions.

The only certainty for the future is uncertainty.

 

[samuel5]

This is what my accountant said when I asked:

A SIPP is a pension fund. You can buy it through one but I wouldn't recommend it as it all gets a bit complicated and you would have to sell the warehouse when you wanted to retire which you might not want to do

 

[PaulThompson]

Hey guys, think the OP has been somewhat obfuscated by the talk of SIPPs
The question of buying in or out of the limited company is separate, if you buy personally then if you were to sell the company in the future (or wind up etc) then you would retain the asset and be able to continue to lease it out to another company. Your company paying you rent would keep the rent off the Corp Tax but put it onto you as personal tax (after interest on the mortgage)
It's probably more sensible to go this way... Your lender will still consider it owner occupied so your accounts will be required. If you need a quote we can help, the challenger banks love this sort of application (while the main banks pretend they do)

 

[MikeJ]

This is what my accountant said when I asked:

A SIPP is a pension fund. You can buy it through one but I wouldn't recommend it as it all gets a bit complicated and you would have to sell the warehouse when you wanted to retire which you might not want to do

Seriously, get another accountant. Also, sit down with an IFA that can handle director's pensions (if you're in Scotland I'll PM you the guy we use).

If you've not got a pension and you're in the top rate tax bracket, then....

You can transfer £40k tax-free into the pension.
You can use up previous years allowances, still tax free.
The pension fund can take a mortgage (about 40% of the value from memory) to make up the difference.
The pension fund charges rent to the company, making future rent payments a contribution to the pension fund. Those payments pay down the mortgage. Rent payments are not included in the £40k per year pension limit.
If you get to sell the company, the company should be in a position to buy the warehouse from the pension plan at the market value.

 

[Tony King]

Seriously, get another accountant. Also, sit down with an IFA that can handle director's pensions (if you're in Scotland I'll PM you the guy we use).

If you've not got a pension and you're in the top rate tax bracket, then....

You can transfer £40k tax-free into the pension.
You can use up previous years allowances, still tax free.
The pension fund can take a mortgage (about 40% of the value from memory) to make up the difference.
The pension fund charges rent to the company, making future rent payments a contribution to the pension fund. Those payments pay down the mortgage. Rent payments are not included in the £40k per year pension limit.
If you get to sell the company, the company should be in a position to buy the warehouse from the pension plan at the market value.

Well i just checked with my business partner (who knows far more than me) - and that is exactly how it works (apparently)!

 

[PaulThompson]

Be aware - If your SIPP needs to borrow to buy the premises then you can only borrow 50% of the pension value (ie £100k pension can borrow another £50k to buy for £150k)
The other way is to use your pension as deposit meaning more buying power (£100k pension, £75k loan to company used as a deposit gives a buying power of £300k and still good tax benefits.)