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Ltd company setup


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So I've established that acquiring further properties through the ltd company structure will be better for me and my wife and now I just need to go ahead and get one setup.

Our case it simple, we want to set it up with 2 shares, A for me and B for wife, split equally. However we want to be able to take differing dividends each year.

I understand that this can be done quite simply by adding the relevant wording into the articles. 

I was wondering if anyone can recommend how I approach this. I've heard a simple structure like this can be bought off the shelf, if so do you recommend a particular website? If it needs a bit more work than that please can someone advise on how I go about doing this?

I believe my case is probably a very common one so hopefully any guidance here can help a lot of people.

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First thing to be aware of is that you can only pay out dividends on profits after paying corporation tax. If you are conducting refurbishments of you properties when you buy them you might build up losses initially and carry them forward to offset against future rental profits. This might mean it could be a few years before you are in a position to actually start paying out dividends.

How will both spouses personal tax situation look in a few years time when you start paying out dividends? It could be very different from how it is now, meaning that the structure you set up now is no longer relevant when you come to draw dividends and you need to make changes.

Remember that you may be able to gift shares to you spouse free of CGT, which can be used later down the line if you need to reallocate shares based on a changing personal tax positions.

If you are sure that you want to allocate different classes of shares from the off, then you would look at alphabet shares. This could be achieved by issuing for example a number of A shares and B shares which had different rights to dividends, which you could base on shareholders respective personal tax positions. If you used ordinary shares then your right to dividends would be based on your shareholding rather than class of share.

Accountants are divided on how these structures would be regarded by HMRC. Some say that it might draw unwanted attention from HMRC whilst others are more bullish towards this kind of structure, so long as it is set up this way from the start, rather than changed later down the line. Because of this I would be very careful about any 'off the shelf' structure and would look to take advice from an accountant or tax advisor, so that if there are problems later down the line the advice would be on their insurance. Being realistic expect to pay higher fees for setting up anything which is not the norm such as this structure. 

 

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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Thank you David for your response. 

We actually do not intend on taking dividends in the short to medium term but we just want the flexibility to vary the dividend distribution without having to change the share split every time. I believe this can simply be achieved by inputting the relevant wording into the articles at the point incorporation.

It just seems like a simple off the shelf product alphabet share structure should be able to achieve this. 

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