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Afternoon folks,

 

I'm currently doing some research into venturing into holiday lets around the Yorkshire Dales area.

 

At the minute i'm doing all the numbers and the considerations to do it all via a LTD structure or not. 

Does anyone out there have any experience of this? One thing that springs to mind is what would be my exit strategy. So if & when i might decide to sell up in the future how easy would it be to sell a holiday cottage type property, is it a limited market. I cant help drawing comparisons with student pods and rooms in hotels, which is not the type of investment for me personally. 

I'd be interested in the experiences and opinions of other who have also gone down this route.

 

Many thanks. 

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There will be a big difference in saleability (and also price) of cottages that can be lived in all year round and cottages with permission for holiday use only.  Buying the latter will let you build a portfolio more cheaply, but will be harder to sell when you exit. 

 

When looking at your structure, also have a look at the tax implications of owning some or all of the properties in your own name and leasing them to a limited company.

 

Remember that income from holiday lets is VATable when you exceed the turnover, if you're planning to go big :)

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It's something you'll need to talk through with an accountant, which I am not :) but I used to work as a PA to a specialist pension IFA and after the rules changed so that commercial property could be held in SIPPs, he had a fair bit of work setting up suitable schemes for company directors to benefit from it - the company sold its premises to a SIPP or SSAS scheme, the pension scheme charged the company full market rent for the space, therefore reducing its profits, therefore reducing corporation tax, and increasing the directors' pensions.

 

It struck me at the time that something similar could be done with holiday lets (though you can't put a holiday let into a SIPP, so don't get the tax breaks).  At the moment, mortgages are slightly easier to get as a person rather than a company (although to be fair, lending on holiday lets is such a small market that it's not as a big a difference as it is with BTL) - so hold the properties as an individual and then your company essentially does rent-to-rent. 

 

- Company collects holiday let income and runs the business of letting them

- Company pays you rent on properties

- Company's profit reduced, therefore corporation tax lowered

- You receive rent from company.

- You pay mortgage.

- At the moment, mortgage interest on furnished holiday lets can still be offset in full against income, so you only pay tax at your highest marginal rate on the difference between what you charge the company and the mortgage interest

- Where the property maintenance expenses fall will depend on the lease written between you and your company.

 

I have not yet run this idea past my accountant, as I'm a basic rate taxpayer currently, so it doesn't really make much of a difference, but once I get near the higher rate band (we're aiming to have 4 or 5 holiday lets as a starting point and then see how we go) I'll ask her for her advice.

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