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Advice needed please - best way to get funds from trading company to property Ltd company


I Gee

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Hi all,

I intend to set up a limited company to hold btl properties, I don't intend to draw a salary from this SPV any time soon.

To seed the SPV, I was planning to make an inter-company loan from my current trading ltd company to the new property company which I assumed from research was the best option.

However my accountant advises the most tax efficient approach will be the property company holds shares and receives dividends as a source of funding from my trading company.

When looking into this, I have seen where people set up a holding companies where both property co and trading co are subsidiaries and some other combinations.

I am hoping you can share your experiences with me please as I am really not sure which is the best approach.

Thank you

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Hi Ighee

It is possible to do the holding company, but there's a few other threads on this forum where it has been suggested that this structure may make it a bit more difficult to secure financing/borrowing. It adds an extra layer of complexity for lenders so some prefer not to, best to chat to a broker (can recommend Simon Allen from Searchlight Finance who is also a member of this forum) before going down this route. There also might be more fees associated with maintaining the extra holding company. 

Personally, I just did the inter-company loan between the SPV and trading co. But do check with the broker and accountant and maybe do a search of the forum to see if you can locate those holding company threads.

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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On 7/12/2019 at 8:45 AM, DerekT said:

Hi Ighee

It is possible to do the holding company, but there's a few other threads on this forum where it has been suggested that this structure may make it a bit more difficult to secure financing/borrowing. It adds an extra layer of complexity for lenders so some prefer not to, best to chat to a broker (can recommend Simon Allen from Searchlight Finance who is also a member of this forum) before going down this route. There also might be more fees associated with maintaining the extra holding company. 

Personally, I just did the inter-company loan between the SPV and trading co. But do check with the broker and accountant and maybe do a search of the forum to see if you can locate those holding company threads.

Thank you for your reply. Much appreciated.

From my research, inter company loans does seem quite popular (hence my initial decision to go with it) and more straightforward though it would helpful if you don't mind sharing with me some of your experience e.g. how straight forward in terms of getting mortgages etc. 

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I used a broker, @simon allen to help with the financing and it was very straight forward. You just submit the info requested via his online system, like where the deposit is from, 3 month bank statements, fact find etc. 

Being funded through the company, you will most likely need to provide a personal guarantee, which potentially means extra solicitor fees.

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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1 hour ago, DerekT said:

I used a broker, @simon allen to help with the financing and it was very straight forward. You just submit the info requested via his online system, like where the deposit is from, 3 month bank statements, fact find etc. 

Being funded through the company, you will most likely need to provide a personal guarantee, which potentially means extra solicitor fees.

Again, a big thank you - I will look Simon up

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  • 2 weeks later...

Thnaks @DerekT More lenders are accepting intercompany loans and there aren't any particular hurdles to overcome. Some lender's want your accountant's input that taking money out of the trading company won't be negative on its cashflow. Both SPV and trading normally need to have the same directors/shareholders. Happy to help when needed.

Regards Simon

Searchlight Finance Ltd

T:01565 654005

 

Landlord and specialist property finance advisor only dealing with investors, landlords and developers throughout the UK and beyond.

Buy to Let - Commercial Finance - Bridging Loans - Development Finance - HMO Finance - Refurbishment Loans - Multi Let - Limited Company - Student Lets - Portfolio Finance

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Hello Simon, 

I will be happy to get in touch.

Thank you for you reply.  I was wondering if using an inter company loans had any impact on Entrepreneurs’ Relief or Inheritance tax. My plan is the new property ltd co. will outlive my current ltd co., what happens when its time to wind up my trading ltd company and there is still a loan outstanding? also, would you advise on charging interest?

 

 

 

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2 hours ago, debbie franklin said:

forgive me for jumping in

should not cause an issue for entrepreneur relief but for iht would be an excluded asset and chargeable to iht but the rest of the value in the shares unlikely to be compromised 

Debbie, many thanks. Things are being to get a bit clearer now and all the advice is really appreciated. Please could you break down "iht would be an excluded asset and chargeable to iht". Sorry, iht is still a bit of a green area for me. 

Thanks in advance!

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