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Hi sorry am newbie on here so please put this post where it needs to be if its in the wrong place thanks. OK, so I will just jump straight in, so the initial small start-up of our LTD company was done back in September 2017 as a JV between Father and 2 sons we will call this company "X", I am one of the sons that came up with the idea of creating a Property Co between us and sourced the first property and I have been doing all the work on the property myself since to begining. My father supply's the funding via a bussiness loan from his sole trader bussiness, my brother does the accounting and set up the company etc. My brother and I jointly loaned the company 65K (this money was borrowed so needs to be paid back to someone else intrest free) on start-up basically to buy the property and pay fees for purchase. The agreement is we take a equal shares 1/3 each of the final profit of the company. As well as I will draw a small wage weekly from the Co X's bussiness account, I am set up as a PAYE on the books (£185 a week after tax). We also have a written agreement that I will be paid an extra £215 a week (after tax) deferred until work is finished on the property this will be at the END of the project works as a cost/expence to Co X in the most tax efficient way. My fathers bussiness loan (interest free) will pay for running costs and materials of the project. Unfortunatly time has drag on, due to severe illness and Covid on my part the job is only nearing completion now. I have been working the whole time but at a serious reduced rate for the last 2 years. Finally 2 major operations later I am on the mend and back to my normal self and finishing the project quickly now. I have been paid £48100 in total via the £185 a week method so far and we have discussed and factored this illness into the project and came up with a fair payment for the work completed which is £38915 after tax either via PAYE or possibly another tax efficient method maybe discussed on here if you guys can help with that? Finaly we get to the profit part (refinancing part maybe not classified as profit yet for tax purposes). We have decided to refinance the property and rent it out. Let me give you some figures first before we get into were we go now. Joint Directors Loan in £65,000 in. Bussiness to bussiness loan from Fathers sole trade company £90,000 in. Total costs so far without my final payment of £38915 = £155,000 Re finance Value of property £320,000 at 25% LTV = £240,000 out After refinancing minus costs + my £38915 payment = £46,085 surplus for dividends or other. Monthly Rental Value £1100 after costs £900 to Co X as profits. The refinance has not taken place yet so Co X is still running at a loss right now. OK so this is what we want to do now. My father and brother wish to cash out their profit via dividends and keep the the house rented for as long as possible we can all draw down £300 a month dividends going forward as per shares allocated. They are no longer interested in property investment and have other business concerns going forward. I would like to start-up by myself a new group of companies though if possible/feasible. The idea is to start-up a new holding company "Co H" with 2 subsidiary Co's "Co 1 and Co 2" one for buying/renting properties and one for refurbing/building contract work. Main questions are: 1) If my holding Co "Co H" held/bought my 1/3 shares in Co X, would I be able to move my part of the refinance/dividend tax free into Co H? 2) If so, do I need to form Co H before we refinance the property in Co X to be more cost and tax efficient going forward for Co H? 3) If I formed a separated LTD company (SPV) whats the best way to move my funds from Co X into the SPV for future projects, I do not wish to take the Co X's money for my own use, I want to invest further whats the best way forward? 4) Can Co 2 (the building company set up in a group) or another new SPV invoice Co X for my final payment of £38915 as building labour (because thats what it is) and then invest that money into further projects in a more tax efficient way? You may have a completely different way of doing this, if so please share, as any help would be Golden! Please note I am not trying to avoid Tax but to be Tax efficient. If you think I am please point it out where as I do not want to fall into any problems in the future. Thanks for kindly reading this far if you managed it! Thanks in advance for any help or advice. Christopher
Can my children loan my btl business money?
toniod posted a topic in Legal AdviceWe spoke to a tax advisor today as we are in the process of setting up a ltd company with our children as part shareholders. We can't find anything online about the advice we were given so I'm testing it out here if that's ok. Our children have received ~£150k from grandparents that is currently not doing anything in a bank account and we can show it having come from grandparents and not parents. Ideally the children would loan this money to the company to invest. My husband and I will also invest a director's loan and the company will invest in property and hopefully grow well (we already have 2 properties and are looking to grow). The children would be paid a commercial rate of interest on their loan of £150k (HMRC rate of 2.25%). Their money is currently in an account rather than a trust so there aren't trustees but given the rate of interest they receive in the bank account is less than 2.25% and they will also be shareholders benefiting from the growth of the investment, it would appear to be a good investment for them. We have been advised that they can be paid the interest on the loan without being taxed as parents as the money came from grandparents and not us. Has anyone got any experience of this? Does the tax advice we have been given make sense? Is it legal for children to loan money? Thanks in advance for any advice Toni
Hi All First post so here goes! I'm considering building up a portfolio of BTL properties over the next few years in the UK. I'm an Irish passport holder who is currently working in Saudi, so I'm a non-UK resident investor. I worked in the UK years ago. I am currently looking at 2 options - setup my own SVP LTD company and / or a JV with a UK business partner . If financially feasible, I will likely use both strategies. As I am a foreign investor and my potential partner is a UK resident I'm unsure if it would adversely affect the business profitability and create issues when deciding to extract profits / sell properties from the portfolio. I currently pay no tax in the UK and my potential business partner would be in the 40% band - again unsure how this would impact on any potential partnership. I'm a bit unsure of the best approach for company structuring, so thought I would seek feedback from the forum. I will of course get professional advice but I'm trying to expand my general knowledge first. Overview of my options and general queries I have: Option 1: Only Myself (SVP LTD Company) Target market Northern Ireland. I may also look at Scotland if property supply / obtaining finance becomes an issue. Which country is the best UK country to establish the company in? BTL properties in range of 50-90k purchase price, with 5-10k light refurb works to add value / increase rent chargeable where required - separate company for renovations beneficial? Initial investment via director loan to company = GBP 60k. I may also initially need to purchase 1 or 2 cheap properties with cash to demonstrate previous BTL experience to get financing. Plan to purchase 2 - 3 BTL's a year for the first 5 years. I will review after 2- 3 years and adjust my strategy if required. Exit strategy - retirement pot, so I plan keep / reinvest all profits in the company. Hold onto properties longer term, potentially sell one every few years if needed or market price is good. Option 2: SVP Business Partner - LTD or LLP Company Structure? UK passport holder/resident and myself. My business partner may also go to work in Saudi in the future, possibly in 1-2 years. Company structure - SVP for BLT mortgages- unsure if Ltd. company or LLP be best route? Target market Scotland - is Scotland the best UK country to establish the company in? BTL properties in range of 40- 80k purchase price, with 5-10k light refurb works to add value / increase rent chargeable where required - separate company for renovations beneficial? Initial investment via director loan to company from both parties= GBP 30k each, so GBP 60,000 in total. Plan to purchase 3-6 a year over 5 years. Re-assess strategy year 3. Exit strategy: UK business partner wishes to let money sit & reinvest into the company for 2-3 years, draw director salary, get his initial director loan out of the company and potentially sell off the odd property if decent returns achievable from year 3 onwards. Exit strategy: I'm unsure about which approach I will pursue, need advice as I'm unfamiliar with UK tax system and if our circumstances will impact profits / returns. Hopefully the above makes sense. All feedback welcome, thanks in advance!
Joint Venture between two Ltd Companies
Ashley Houlton posted a topic in Refurbs & DevelopingHi Guys, Another question for you here. I was speaking with an old acquaintance of mine a week or so back and mentioned I was getting into the property game (Flips to start off) Anyway, it came about that he had access to the same amount of funds as me. The general conversation was around joining funds together and splitting everything down the middle including renovation work. I totally trust this guy and know he has a proven track record for his work. (His parents have 16 BTL properties and he does all the maintenance) So...... He has a newly formed Ltd company and so will I in the new year. If we were to join funds together how would we go about purchasing a property for cash? My thoughts were that he or I would 'loan' the funds to one of the companies and draw up a legal agreement to that affect. When the project is finished he draws out his cash and 50% profit to his business and the remainder stay in mine. I'm not exactly sure how or if this would work but would love to hear your take on it? Speak soon! Ashley