Buying foreign property via company

J

JohnSp

Registered User
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29
I read most of the key post on why it's generally a very bad idea to buy property via your company (and I do understand why and agree) but I'd like to float a slightly unusual set of circumstances and see if they justify an exception to the rule.

Circumstances:
I own a Ltd company 90:10 with my wife.
We'll both be 55 in 3 years at which time we plan to liquidate the company and distribute the net proceeds all of which will be subject to Retirement Relief.
Company trades well and has built up excess cash of €250,000.
We want to buy a place in Spain to retire to and have identified a property costing €250,000.
In order to put the excess cash to some use now and secure the property we want in Spain I'm thinking of allowing the company to buy the property, rent it out commercially via a local agent for the next 3 years (it may or may not generate much rental as there's lots of competition locally) and then prior to liquidating the company we personally buy the property from the company for e.g. €255,000 (assume that's market rate supported by a local estate agent valuation) and the €255,000 net of CGT on €5,000 goes onto the Balance Sheet as cash for distribution via the liquidation.

I've a feeling the above will either be offside in a number of ways tax wise or company law wise or is just dumb as there's a far better way to achieve buying the property now without either doing so from (income) tax paid personal funds or having to wait 3 years to buy with tax free retirement relief funds.

Don't be too harsh on me!!
 
T McGibney said:
For starters, you won't get retirement relief on non-business assets, including excess cash.
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I guess it depends whether the Rev Comm definition of Excess Cash is the same as mine and whether my wife and I can avail of tax free termination payments prior to or as part of the liquidation process.

Also, my understanding from 19-06-03 para 3.13 of the Tax and Duty manual (sent to me by an Accountant friend) that "where the company assets are disposed of not more than six months prior to the disposal of the shares or appointment of a liquidator, and with a view to the disposal of shares or the appointment of a liquidator of the family company, the Revenue will permit the proceeds of such a disposal to be treated as chargeable business assets for retirement relief purposes. Is a longstanding practice and was initially published by the Revenue Commissioners in Tax Briefing Issue 26, dated April 1997."
 
Brendan Burgess said:
Why have you built up excess cash?

Has whoever given you this advice got a plan for you to extract it?

Brendan
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Hi Brendan,

Had a couple of better than average years and it just accumulated, no one advised me to accumulate it.

Personally we want to buy a property in Spain to retire to. There's excess cash in the company which would cover the cost. Hence the thread.

If it's a total non starter I'll probably just add whatever (if any) that would be deemed excess cash for Retirement Relief purposes to our pensions and extract the balance on liquidation with the benefit of Retirement Relief.
 
JohnSp said:
Had a couple of better than average years and it just accumulated, no one advised me to accumulate it.
Click to expand...

Did your accountant not advise you not to accumulate it?

Forget about your overseas purchase for the moment. Talk you your accountant or maybe change your accountant and talk to a tax advisor and see what is the best way to utilise your profits.

For example, if you made a profit of €100k in 2020 and paid 12.5% Corporation Tax on it, you can make a loss of €100k in 2021 - get the cash out and get the Corporation Tax back. I am not saying that this is the right strategy. I am saying that with big figures like this, you need to have an active written plan and "not just accumulate".

Brendan
 
Yes, I get the point thanks Brendan. Was just curious about the possibility ref buying foreign property in these particular circumstances. It may not be the smartest or most tax advantageous thing to do but I'm interested to know if the plan would work or not.
 
You'll need to check that because the asset is non-trading (i.e. investment) does it count for retirement relief in Revenues eyes. You'll need to read more of the Revenue manual to fully understand the rules as I suspect the bit you quoted above is only connected to trading assets.

The most obvious solution to your cash problem is to dump it into your pensions so unless you have 4 million in your pension (2m you + 2m wife) forget this idea.

@Steven Barrett @Marc Are two regular posters that could point you in the right direction here.
 
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