Tax advice for directors of SPV's

[john-b 0]

Hi,

First time on the forum.  I have recently set up a limited company with a close friend to use as a SPV, which we have just bought our first property using.  I understand the tax implications regarding an ltd, we will not take money out of the company at all, instead, just pay corporation tax and reinvest the money in the business. 

I own a residential property under my name which I live in and currently rent one of my spare rooms out for £550pcm, which is in line with the rent-a-room scheme guidelines.  I am planning to move out of the house this year and into a rented flat with my new partner, but, renting the house out as a 4 bed HMO in the process.  My problem comes whereby I am a 40% tax payer from my day job so I want to have the 4 tenants paying straight into the business account, essentially reducing my tax bill by 21%.  The rental income is not intended for personal use at all, I put all my savings into the company at the moment, I just want to avoid paying 40% tax on the money I would put straight into the business anyway.  Long story short... As a director of an ltd, can I have rental income paid into the company account from personally owned property in the aim to reduce my tax bill. 

Thanks for the help!

John

 

[DerekT 221]

Hi John

Not an accountant, so please consult a licensed tax adviser and mortgage broker. Couple of things to consider;

• If switching your PPR to a HMO, if it's mortgage you'll need to gain consent from them first or switch it to a HMO mortgage; and
• I don't think the payments to your business account will reduce your personal tax unless you transfer the property to the limited company (which comes with its own tax implications like CGT and SDLT). As the asset is held in your personal name, the income (less expenses) will be added to your personal income and taxed at the relevant personal tax rates. Otherwise, everyone in the higher tax bracket would set up a proxy business account and dump their income in! Once you've paid personal tax on it, then you can pay the funds into the limited company as a director's loan, which you can then withdraw tax-free if needed as you've already paid tax on it. 

 

[debbie franklin 49]

For all the income to be taxed in the company you would need to transfer the asset to the company

[ian_a 0]

On 1/28/2020 at 5:32 PM, debbie franklin said:

For all the income to be taxed in the company you would need to transfer the asset to the company

Is there a link to a previous question regarding you response Debbie?

[debbie franklin 49]

Sorry not sure what you mean?

[conrad_paton 105]

Hi all

I Debbie was replying to this..

On 1/23/2020 at 1:55 PM, john-b said:

Hi,

First time on the forum.  I have recently set up a limited company with a close friend to use as a SPV, which we have just bought our first property using.  I understand the tax implications regarding an ltd, we will not take money out of the company at all, instead, just pay corporation tax and reinvest the money in the business. 

I own a residential property under my name which I live in and currently rent one of my spare rooms out for £550pcm, which is in line with the rent-a-room scheme guidelines.  I am planning to move out of the house this year and into a rented flat with my new partner, but, renting the house out as a 4 bed HMO in the process.  My problem comes whereby I am a 40% tax payer from my day job so I want to have the 4 tenants paying straight into the business account, essentially reducing my tax bill by 21%.  The rental income is not intended for personal use at all, I put all my savings into the company at the moment, I just want to avoid paying 40% tax on the money I would put straight into the business anyway.  Long story short... As a director of an ltd, can I have rental income paid into the company account from personally owned property in the aim to reduce my tax bill. 

Thanks for the help!

John