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Loaning money from contracting company to property company


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Hi Hubbers,

This is my first post on the PropertyHub, so please be gentle!

I need some help/advise on loan from company to company whereby the shareholder of both companies are the same.

The Dilemma

I am currently the only shareholder of a limited company for quantity surveying whereby I provide commercial services on a freelance basis. I have been doing this for couple of years now and have managed to save a substantial amount in my business account.

As the money is just sitting in my business account, I want to utilise it, and am now looking to set up a Buy to Let limited company to build a portfolio for retirement and to pass on to my children.

The Million Dollar Question(s)

So my question(s) is:

Is it possible to loan the money from my QS business to the new BTL business?

What are the tax implications for myself if I am the sole shareholder for both companies?

Is it better to have additional shareholder or partner to be the sole shareholder for new company?

 

I look forward to hearing from my fellow hubbers on any advise they can share with me, as my accountant is giving me a vague answer, which is leaning towards me not being able to do this in a tax efficient way!

Thanks for reading the post if you have reached the end! Much appreciated.

:) 

 

   

 

 

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Hi newbie786

You can set up a new limited company with the right SIC codes (see below). You can then arrange an inter-company loan (i.e. transfer net profit / savings from your QS business to the property company). 

Shareholder wise, it'll depend on your personal situation. You will need to be the director/shareholder of the new business, and it'll be up to you who else to include. Just be mindful that if you have others in the property company, and you'll be purchasing properties with a mortgage, they'll also need to be referenced and the directors will most likely need to provide a personal guarantee. With children as shareholders, depends on how old your children are - i.e. if they're really young, make sure they have different class shares, be aware that some lenders may also not like this. If they're adult children, then might be fine, but also be aware of the different share classes especially if you'll be paying out dividends. 

As always, best to run it by your accountant. If your current one isn't property focussed, or isn't an investor themselves, then maybe seek advice from a different accountant.  It's like visiting the correct type of lawyer or doctor when you have a legal or health issue. 

Property-related SIC codes:

  • 68100 - buying and selling of own real estate, e.g. flipping and trading properties
  • 68209 - letting and operating of own or leased real estate, e.g. buying and holding property and renting it out
  • 68320 - management of real estate on a fee or contract basis, e.g. set up your own management company,
  • 68310 - mainly for real estate agencies, e.g. deal packaging, sourcing properties

Best of luck!

Personal Blog: https://abcdad.co.uk
Property Spreadsheet and Deal Analyser: https://abcdad.co.uk/property-spreadsheet
Looking to read some Property books? https://abcdad.co.uk/books/property-books
Follow on Instagram: @abc.dad

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Hi Derek,

Thank you for your concise and well written response. For me to utilise the funds in my current company, will help me significantly in building a property portfolio.

My children are all under 7 so I don't think it wise to have them as shareholder in the company just yet. I think I do need to get an accountant who is better equipped in property knowledge.

Any recommendations on that front?

 

Thanks!

 

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There's the Property Hub Tax folk that you can contact. 

Personally, I use Rita4Rent, who work in partnership with the Residential Landlords Association (RLA) and sponsor the other forum, Property Tribes. I use them for my Business Analyst limited company and also property company. Been very helpful. 

But do call around and have a chat with the accountant. Most should be happy to chat about their services, so you can ask about their experience etc.

Personal Blog: https://abcdad.co.uk
Property Spreadsheet and Deal Analyser: https://abcdad.co.uk/property-spreadsheet
Looking to read some Property books? https://abcdad.co.uk/books/property-books
Follow on Instagram: @abc.dad

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