Best limited company structure - BTL

[r-nick 0]

Hi all, 

I am new on this forum and would be grateful for any advice.   Myself and my wife have our own trading Ltd. companies (unrelated to property!).  We want to set up a Limited company for rental.

We have been advised that setting up a so called layered Ltd company structure would be a good option - ie. both mine and my wife's Ltd companies would be equal shareholders of the new Ltd company, and us both being directors (but not shareholders).  This would allow funds to flow freely between the companies (apparently!)

Can anyone shed any light on whether this 'layered' set-up would make any sense from a tax perspective, or are there other particular advantages?  I have done some searches online and it seems that many BTL mortgage companies actually do not accept 'layered' structures, requiring individuals and not companies to be shareholders. 

Alternative is both of us (individuals) become directors and equal 50:50 shareholders, but not sure how this would affect any cash flow and money transfers between the companies.  I guess it would be by inter-company loans.

We would not be needing to withdraw any profits generated personally (at least in the short-term), and therefore would be happy to keep funds in the limited companies for further investments.

Any advice would be much welcomed as to the pros and cons of both of these Ltd company structures and what lenders generally prefer / any personal experiences you have had.

Thanks in advance,

Nick

 

[david slater 118]

15 hours ago, r-nick said:

We have been advised that setting up a so called layered Ltd company structure would be a good option - ie. both mine and my wife's Ltd companies would be equal shareholders of the new Ltd company, and us both being directors (but not shareholders).  This would allow funds to flow freely between the companies (apparently!)

Hi Nick. I am not sure how lenders would feel about a property investing company being owned 100% by a trading company/companies. Assuming you are wanting to use mortgage finance then it will be a good idea to talk to a broker first before you proceed.

 

[r-nick 0]

2 hours ago, david slater said:

Hi Nick. I am not sure how lenders would feel about a property investing company being owned 100% by a trading company/companies. Assuming you are wanting to use mortgage finance then it will be a good idea to talk to a broker first before you proceed.

 

Thanks David.  It's something the accountant has suggested but not why this structure over say a holding company.

Yes will need to see what lenders feel.

Any fundamental flaws with this set up assuming lenders don't mind?

[Adam Hosker 67]

On 2/18/2021 at 8:02 PM, r-nick said:

both mine and my wife's Ltd companies would be equal shareholders of the new Ltd company

Do you intend to obtain a mortgage? As complex ownership schemes will hinder this.

Mortgage Lenders want it clear and simple, with people owning the shares.

Your Complex Ownership they would not like as if either of your companies get into trouble, the administrator will take control and try and sell the stake in the property company. That's a headache the lender does not want. This is why like "Special Purpose Vehicles (SPV)" it keeps everything simple.

You may still be able to get mortgages but lenders available to you will be severely limited.

[david slater 118]

Anything complex will also result in higher accounting fees.

[r-nick 0]

Thanks for the replies.  

I am making more enquiries as to how this could work.

So having a holding company owning my own limited company, my wife's limited company and also the SPV - would this be a good idea?

Would lenders see this as a straightforward structure?

Thanks once again

 

Nick

[Adam Hosker 67]

22 hours ago, r-nick said:

So having a holding company owning my own limited company, my wife's limited company and also the SPV - would this be a good idea?

No, they do not like this kind of structure enmass.

You will have a minority of lenders willing to lend but given the number of LTD Company Lenders is already low. It's not something we'd advise to do.