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alex usovs

SETTING UP LIMITED COMPANY

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Dear all,

I'm a higher tax payer therefore made some research and thought I'd be better of setting up a limited company and buy my BTL property under company.

Can you kindly advise me on process in terms of setting up limited company?

 

Kind Regards,

Alex.

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Hi Alex,

It's quite easy to set this up. You can either do it yourself via gov.uk or use a formation agent. I used rapidformations who were actually very quick. 

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You can do it online for about £15, although we paid our accountant £40 to do it to make sure the codes were correct etc. If you're doing it, make sure you get the right code for the type of business you're planning

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I'm looking to set up Limited company purely for tax purposes.

Do I need to specify what exactly this company is going to do? 

Do I need to record anything?

 

I'm very new to all of this so sorry if it sounds very basic.

Any advice would be much appreciated.

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Hi Alex,

As Dino mentioned, you need to look at SIC codes - These are codes which tell the tax man what you're company is doing, and how you should be taxed.

I think the codes you'll be most interested in are:
- 68209 is for Property Letting (BTLs).
- 68100 for Property Flipping (Do them up and sell them).

You mostly want to just have one of these codes assigned to your business (so if doing both, setup 2 companies), which is referred to as a Special Purpose Vehicle (SPV) as it affords you better tax treatment, and usually the opportunity of Entrepreneur's Relief as an exit strategy (although I don't know anyone who has exercised this in Property, only friends who have done it in IT Consulting).

It can be a bit daunting if it's your first time, so as Dino suggests, it may be worthwhile to speak to an accountant to help set it up.
Are you planning on using an accountant for your company filing/books? If so they would be a great person to help with company incorporation.

**As a disclaimer, I'm not an accountant, this is all based on my setting up my property company, and from having my own company for 4 years in my main line of work.


Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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I mostly do my own books with my Father-in-Law checking over them (he's an accountant) but I'm in Hertfordshire.
Have you attended any property meetups, as sometimes speaking to local investors is a good way to get a recommendation?

Other than that, meet a few and get a feel for them, and importantly get a clear cost structure as some accountants charge in quite different ways.
e.g. My accountant for my main business (unrelated to property), charges me £95pcm but that covers all filing, salary, self assessment etc.
Some other accountants will charge you less per month, but then will charge additionally for yearly tasks.

 


Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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On bank accounts:

We currently use Metro Bank at the moment, as if you keep £5k parked in the account there no fees for up to 50 transactions per month.
This will be revisited once our portfolio is at the size that it necessitates more than 50 transactions per month, but for now it's a great starter account, and their service has been excellent - I setup the account in branch while doing some other work, and the guy gave me half of his desk, got me a coffee and let me do my work while he just interrupted as and when he needed to ask a question.

I hear Tide is also a good option - although I'm not sure if they've got past the fact you can only have one account holder (whereas we are 2 director's).


Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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Hi Tommy, 

I also use Metro and find them to be incredibly helpful for business banking (my previous experience was with Co-operative (who couldn't have been any less 'Co-operative'(!)).  When I needed a business bank set-up in very short order, I found that Starling did it in less than 24 hours for me and all of it was easy enough to set-up through the app.

Adrian 

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I chose Yorkshire Bank as they have no charges and it literally took me five mins to complete online and got my card the same week.   The app isn't bad either.

I do remember on my last purchase I had to have my ducks in a row and transfer chunks of £20k to my solicitor.  Not sure how that compares with others but it wasn't too bad - although it could be if purchasing multiple houses.  Then again if your in that position, a charge for a few quid a month probably won't bother you :lol:

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I do understand that it's "only as much" that you can offset as Ongoing Expenses to avoid Corporation tax of 19%.
 
- Can any of the cost for my residential property be offset as Office in any way? Any part of it's mortgage?
 
However, I wanted to know whether, I can offset more things as company expense rather than ongoing costs to avoid Tax on Dividends of 32%?
 
Let's say as we discussed things such as:
 
- Dinner
- Some of the travel expenses  to be paid through company card
- Any Clothing or anything can be purchased?
- Any Gadgets such as new phone to be purchased? Will if reduce the taxable amount for Corporation Tax or Can it be versus Divident Tax?
 
I'd like to make as many purchases as reasonably possible using Company Card, so that in case "I WILL NEED" to take dividends out as an unforeseen circumstance there is not much left and save my hard earned cash for whatever it may be needed rather than paying with my Cash that was already taxed 40%. + Pay another 32% Divident tax If I needed to take money out from company.
 
End Game:
 
If I was to keep Rental Income in the company, later invest it in purchasing one more and selling it,
 
Am I correct to say that there will only be Corporation Tax of 19% and Capital Gains tax of 28%?
 
Kind regards,
Alex.

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There is a list of whats allowed as company expenses on HMRC website and this includes things like a phone/use-of-home and general items that are exclusiveky for the use of the business. You have to be sensible and not take liberties plus your accountant should be your main point of advice. Clothes is pushing it for sure

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Hi Alex,

As always check with an accountant/tax specialist, but from my experience:
- Can any of the cost for my residential property be offset as Office in any way? Any part of it's mortgage? - Yes you can claim a small portion of expenses for 'Use of Home Office'.

- Dinner - Only while away from your home office location on business e.g. going to view properties in another city and staying over/back home late.
- Some of the travel expenses  to be paid through company card - You can charge any travel expenses for business use e.g. going to an investment area, going to see your accountant, going to a property meet-up.
- Any Clothing or anything can be purchased? - Generally this is a no, but I believe you can charge for any safety clothing e.g. Overalls and steel toe-capped boots.
- Any Gadgets such as new phone to be purchased? Will if reduce the taxable amount for Corporation Tax or Can it be versus Divident Tax? - I believe you can own 2 phones through the business per director/employee. This will be down as an asset and not an expense, but will come of your profit. I would check with an accountant on this one. This won't come off Dividend tax, as that's off of you personally.
 
In general, if you are doing something wholly for the business you can charge it as an expense. Including training (such as property training courses) but there's a slight grey-area that it should only be training for an area you have knowledge in and you're furthering it.

If you're not sure on a lot of these things, it's probably sensible to engage an accountant for your company.

Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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Thank you so much for your advice guys, much appreciated.

I'm now looking for a  property coach that can help me with my next steps.

Any suggestions?

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19 hours ago, alex usovs said:

Thank you so much for your advice guys, much appreciated.

I'm now looking for a  property coach that can help me with my next steps.

Any suggestions?

Have you listened to the podcasts or done the university courses on here? If not, start there. And read Rob Dix's book, complete guide to property

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I second that, although I've not done the University Courses on Property Hub yet (shame on me!) the Podcast and reading of Rob Dix's book really helped.

I've not sought out any Property Coaches, but that's more a personal thing asI kinda like to carve out my own way if that makes sense?
Also, posting on here for next steps is a good idea, as you'll get a mix of stuff.

The main one for your first steps, and something covered in Rob's book, is about choosing your strategy as this will really help you decide on how you're going to proceed and will be worth sitting down and thinking about.


Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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This will effectively make you a trading company and not a SPV (a SPV only has 1 SIC code).
I do believe some lenders only lend to SPV's and not trading companies, and additionally you will not benefit from tax relief on close-down of the company should you go for entrepreneurs relief.

For this and other reasons, most people performing 2 activities will have separate companies, 1 for say BTL, 1 for flipping.


Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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Hello Everyone,

Just opened a company, thanks everyone for help and support.

I need to open bank account now.

Which are leading options? Metro, Tide, Counting UP?

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Think there was another topic on this, but we went with Metro to begin with (mostly as there's a branch nearby) and I have to say their service has been excellent.
I had an issue whereby I forgot to sign a document in-branch, and I was about to head into London for dinner so couldn't make it into the branch. My account manager from my local branch ran down to my house in a suit so I could sign it before I caught my train!

If you park £5k in an account you get something like 50 free transactions a month (plenty to start with), so our plan is to stick with Metro till we hit a larger portfolio, and then look to move to another account and/or provider.

I have heard good things about Tide, and if they allowed more than one account holder I think we would have gone with them.


Tommy | Trifecta Properties
Website: www.trifectaproperties.co.uk

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