Jump to content
andrew wilson

Money in existing Limited company

Recommended Posts

good question....

 

In my numerous conversations with different people about my ltd co investing approach ( ie loan fund to my property ltd co to buy cash and then re-finance after 6 months ) this was never mentioned as an issue, however the proof will be in the pudding when i look to refinance later this year !


mark-morris.jpg

The Manchester Meetup takes place on the first Thursday of every month, find out more here

Share this post


Link to post
Share on other sites
On 1/20/2018 at 6:41 PM, 01smartc said:

Hi, 

 

I have been looking at this structure for myself - however I have been told it may be harder to get finance through a company that is a subsidiary? 

 

Is there truth in this? 

 

Chris 

@01smartc Hi Chris.  I had no issues getting finance.  I purchased 2 properties last year with no problem.  I used RMP for both of these purchases and received excellent service from their brokers. I spoke to them regularly through the process there were no issues at all.

 

Cheers

David

Share this post


Link to post
Share on other sites

@david hailey

 

Hi David,

 

Appreciate your posts and the group structure you have outlined, its something I myself have done.

 

I have different approach from taking dividends compared to your management fee approach. I think @tkgregory touched on it, if you already have paid corporation tax, do you need to pay it again?

 

So I worked with my accountant on this to define what is best if you have like I or Tom have surplus capital in our consulting companies, resulting from years of grafting :)

 

So group structure is setup a Holding Company (shareholder is you) as the parent company of the subsidiaries; consulting company and property company, by parent it is the 100% shareholder of both limited companies.

 

As I have capital sitting on my consulting company which already has paid Corporation Tax, I declare a dividend from my consulting company to the shareholder which is the holding/parent company. The holding company can then credit the property subsidiary via means of a bank transfer and/or declare a dividend to its shareholders (you). PAYE still comes from the consulting company.

 

I personally didn't go via the Consulting company as parent and property company as subsidiary is due to IR35, if caught then the subsidiary could be used by HMRC to repay any money owned, BUT mortgage advisors prefer this approach because they can see the parent company as providing the income clearly for securities. So caught between a rock and a hard place.

 

There are mortgage brokers who can do the group structure as above but very limited providers because its not as much demand yet ( I hear the game is changing as this is type of demand is increasing)

 

hope this helps some people, but if I am wrong happy to be corrected.

 

Jazz

 

Share this post


Link to post
Share on other sites

Hi Guys,

 

Question 1: I am getting ready to set up my company structure... I wonder, if you took into account the end of Trading Company (e.g. when you want to retire from the trading business). How easy/difficult would it be?

 

My plan is to keep the trading company until I will become financially independent. Then I will have an option to close it (not sure if I want to retire at all - but I need to consider this scenario). Obviously, the Letting company will work as my private pension. Hence, it will never be closed.

 

Question 2: I assume that scenario of having Holding Company and 2 sub companies requires 3 bank accounts? I wonder, if there is a need to keep the holding company. If Property/Letting company would be parent company, then I should be able to transfer capital (not loans). Is there anything special about Holding Company that I am missing in this picture?

 

Hope it makes sense.

Kind regards,

Lukasz

 

 

Share this post


Link to post
Share on other sites
On 20/01/2018 at 6:41 PM, 01smartc said:

Hi, 

 

I have been looking at this structure for myself - however I have been told it may be harder to get finance through a company that is a subsidiary? 

 

Is there truth in this? 

 

Chris 

Hi ,

 

Just wanted to post an update on this question from Chris. I am in the early stages of getting my first mortgage via my limited company and this topic ie subsidiary came up with my broker. It would seem that this structure does narrow the field but there is still plenty of lenders out there happy to lend.I am reliably informed  the trend seems to be that any restrictions on lending to this type of set-up are being relaxed as lenders are getting to grips with this type of structure and the benefits to investors.

 

Cheers

 

Mark


mark-morris.jpg

The Manchester Meetup takes place on the first Thursday of every month, find out more here

Share this post


Link to post
Share on other sites

Hi all

 

Great topic. I'm also looking into doing this. To transfer the funds from my IT ltd into an SPV co in order to invest in properties.

 

I don't get though why do you need to make the 2 companies connected through shares. I don't think you need to make them subsidiary, holding co etc

 

Why not just lend from one co to the other, at arms length and charge the commercial interest i.e. 3%.

 

The interest rate is a profit for the IT co but an expense for the SPV co , so no gain - no loss.

 

When you close down the IT co, you can transfer the loans back from the SPV and then claim enterpreneurs relief paying only 10% on the total amount.

 

However if you transfer it as capital or special divs from one co to the other, your only option in the future in terms of taking money out of the companies, is by dividends and therefore pay the dividend tax which could even be 32.5% if you are on the higher rate.

 

So is there any actually benefit of setting one co as shareholder of the other or is this just an unecessary thing?

 

George

Share this post


Link to post
Share on other sites

Hi George,

 

I have done pretty much what you describe. Two companies that are separate.

 

My accountant is happy with that.  Check what your accountant recommends.

 

Some lenders don't like this arrangement (one company loaning to another, whatever the structures are) so if you are looking to get a mortgage, speak to your broker.

 

Andrew

Share this post


Link to post
Share on other sites
17 hours ago, andrew wilson said:

Hi George,

 

I have done pretty much what you describe. Two companies that are separate.

 

My accountant is happy with that.  Check what your accountant recommends.

 

Some lenders don't like this arrangement (one company loaning to another, whatever the structures are) so if you are looking to get a mortgage, speak to your broker.

 

Andrew

Hi Andrew

 

Good to know.

 

By the way how do you determine the exact rate you charge on the loan so that its classified as a commercial rate? Do you use this table at all i.e 2.5% : https://www.gov.uk/government/publications/rates-and-allowances-beneficial-loan-arrangements-hmrc-official-rates/beneficial-loan-arrangements-hmrc-official-rates#actual-official-rates

 

 Also what loan term do you specify on the loan documentation? Is it perpetual without maturity or does it mature and roll every 1 year?

 

thanks

George

Share this post


Link to post
Share on other sites

Hi George,

 

Now it sounds like you know more about this than me.

 

In the agreement I have currently, I have applied an interest rate of 1.0% PA.

It's an agreement that I was given by an accountant. It just says 'Loan agreement' at the top. The term of the loan is interest only for 50 years.

Share this post


Link to post
Share on other sites
On 6/5/2018 at 5:36 PM, andrew wilson said:

Hi George,

 

Now it sounds like you know more about this than me.

 

In the agreement I have currently, I have applied an interest rate of 1.0% PA.

It's an agreement that I was given by an accountant. It just says 'Loan agreement' at the top. The term of the loan is interest only for 50 years.

 

Thanks Andrew. I'll do the same arrangement. My accountant is also fine with it.

 

As long as the loan is not written off in the future, in which case he warned it could be classified as salary withdrawals instead of loan and would have tax implications. No problem to keep rolling the loan forever though.

Share this post


Link to post
Share on other sites

Hi All,

 

Looking to go via one of the structures (holding Co. V inter-company loan) mentioned in this thread but am getting confused with the pros / cons of each.

 

Could anyone perhaps bullet point the relative pros and cons of each? 

 

Thanks.

Share this post


Link to post
Share on other sites
On 6/4/2018 at 7:56 PM, buyforsell said:

Hi all

 

Great topic. I'm also looking into doing this. To transfer the funds from my IT ltd into an SPV co in order to invest in properties.

 

I don't get though why do you need to make the 2 companies connected through shares. I don't think you need to make them subsidiary, holding co etc

 

Why not just lend from one co to the other, at arms length and charge the commercial interest i.e. 3%.

 

The interest rate is a profit for the IT co but an expense for the SPV co , so no gain - no loss.

 

When you close down the IT co, you can transfer the loans back from the SPV and then claim enterpreneurs relief paying only 10% on the total amount.

 

However if you transfer it as capital or special divs from one co to the other, your only option in the future in terms of taking money out of the companies, is by dividends and therefore pay the dividend tax which could even be 32.5% if you are on the higher rate.

 

So is there any actually benefit of setting one co as shareholder of the other or is this just an unecessary thing?

 

George

 

Hi George,

 

How would you transfer the loans back from the SPV if the SPV has used them to invest in property??

 

Or am I missing something? :unsure:

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×