What is the most tax efficient way to buy a property with cash from my business bank acc?

J

Jimbob1234

Registered User
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Hi all,

Newbie to the forum here with lots of questions, please go easy on me.

My business partner and I set up our ltd company three years ago and it's going very well.

We have zero employees and have paid all tax and vat owed so far, and have no debts or outstanding bills.

We currently have 200k in the business bank account doing nothing.

By next May, my business partner and I anticipate we will have enough money in the account to buy two properties cash.

I have forecasted that by then we should have enough cash in the business bank account to pay for them.

These will be residential homes for each of us to live in so see this as an investment in. We do not have great credit scores for numerous reasons which gives me doubts that I will be able to get a mortgage which is why I'm keen on buying the property with cash, outright.

I'm aware we cannot just take the money out (150k+ each) of the business without paying hefty personal tax bills so would like some guidance on how to do this in the most tax efficient way.

I have spoke with my accountant who has suggested a couple of ideas including take the 40% hit on personal tax which just isn't tax efficient enough for us.

Can anyone suggest how I can buy my property in the most tax efficient way possible?

Any information on this would be great, also any additional tips or advice would be great.

Thanks in advance
 
Jimbob1234 said:
I have spoke with my accountant who has suggested a couple of ideas including take the 40% hit on personal tax which just isn't tax efficient enough for us.
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Your accountant has got it in one.

Take the money out of the company.

If you leave it there, you will pay Corporation Tax on the profits.

And then whatever way you take it out, you will end up paying income tax on whatever is left after the Corporation Tax.

Brendan
 
If you take the money out from the company, either by way of salary or distribution/dividend you'll end up paying marginal rate tax on it...

An option to explore - buy the properties in the company name - no immediate tax leakage - then you could either rent the properties from the company at market rent, otherwise you'll end up paying BIK on the assumed rent - not an option to dive in to quickly, but probably worth exploring and taking tax advice on...

When taking that advice you should explore the exits mechanisms when say you (the company) want to dispose of the proprerty (ies)...

Hope that helps...
 
Hi Bank Manager.

That idea is not worth exploring.

One of the great tax free investments is buying your own home. The imputed rent is tax-free. The Capital Gains are tax-free.

So whatever about buying an investment property or one's own premises, one should never buy one's own home through a company.

Brendan
 
What other idea did your accountant have?

Get a copy of your credit score, and then see if you can get a mortgage. Are you both single people? In what way will the houses be investments for you?
 
Brendan Burgess said:
Hi Bank Manager.

That idea is not worth exploring.

One of the great tax free investments is buying your own home. The imputed rent is tax-free. The Capital Gains are tax-free.

So whatever about buying an investment property or one's own premises, one should never buy one's own home through a company.

Brendan
Click to expand...

True Brendan - however the original poster sought advice as to possible alternatives to just taking cash from the business in whatever format and paying marginal rate tax on same - the Revenue will take a slice here of the action here, either now or at a later date - personally I'd be reluctant to give the advice that something isn't worth exploring without fully understanding the persons individual circumstances - e.g. we don't know the individuals age, could retirement relief play a part in minimising the tax leakage if the original poster is of that age and planning to hold the asset for 10 years - my original reply did state that this wasn't something to dive in to quickly, that the person should tax tax advice and as part of that advice s/he should specifically explore the exist mechanisms...
 
I’m finishing a pint here so this is a dangerous top of the head thought, but what if you each set up a self-administered pension, bought a residential property through it, and then your scheme rented its property to your partner and vice versa?
 
Gordon Gekko said:
I’m finishing a pint here so this is a dangerous top of the head thought, but what if you each set up a self-administered pension, bought a residential property through it, and then your scheme rented its property to your partner and vice versa?
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Pint at lunchtime? Nice ;)

I couldn't see a PT agreeing to that under the arms length rule. Renting out to business partner would be a bit iffy.

There's no magic tax avoidance schemes of getting money out of your company so you can use it to buy a house for yourself. If you wanted to rent it, then Gordon's self admin pension would have been my suggestion too. But sometimes, you just have to suck it up and pay the tax.


Steven
www.bluewaterfp.ie
 
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