Office Premises: Should I personally purchase it or should the company?

L

LouthMan

Guest
Hi Guys

My business is in the North but a question that applies everywhere. Should i personally buy our new office or should the business. I am 100% owner of the business and i do intend to sell the business down the road, don't know when. Don't know if i gave enough info ?

Thanks
 
Re: Office Purchase

While obviously you need to discuss this with the business' accountant/tax advisor, it is often better to keep buildings out of the business ( i.e. assuming that you are 100% owner of a limited company )
In that way the business would rent the building from you. The rent would enable you to discharge any mortgage etc. Bear in mind that this route means (a) a deduction on the company for the rent at 12.5% and (b) rental profits for you at your marginal rate. ( profit being rent less interest on loans/insurance etc. ) DOwn the line on selling the business you have the option of retaining the premises and renting to another party or to the new business owners or possibly selling the building and business to a new owner. There are reliefs then surrounding CGT and retirement relief which might be availed of if sold to the one party. But from your post that may be a long way off yet to be considered relevant.

You could purchase the building in the company and have the company pay the associated mortgage. The building IS A COMPANY ASSET and would be exposed if an insolvent liquidation occurred ( hopefully not tho )

Apart from accounting/tax advice I'd also recommend you discuss this with your legal advisors for their input.
 
Re: Office Purchase

It goes without saying presumably that "business" in the above context means limited company?
 
Re: Office Purchase

I wouldn't even discuss it with your accountant or solicitor, as they might mislead you.

You are always better off buying a property in your own name and letting it to the business.

You are diversifying and protecting your assets. If the business gets into trouble, the creditors will not be able to claim against the property.

If you have equity in your home, you should borrow as much as possible against your home as this will be cheaper than a commercial mortgage. You will probably have to take out a commercial mortgage as well, but it will be a lot cheaper as the loan to value percentage will be a lot lower.

The main tax benefit is that you will get hit once for CGT when you sell it. If a company owns it and sell it, the company will pay CGT on the sale. And when you distribute the profits to yourself you will get hit for CGT again.

If you are selling the business at a later stage, the purchaser will almost always prefer to be buying a business rather than buying a property.

If you decide you want to give your employees some shares at a later stage, you are giving them shares in the business and not in the property.

I have seen a few properties for sale which are held in companies. The auctioneers tell you that you only have to pay 1% stamp duty, which is correct. But you have to allow for a potential or deferred liability to CGT. And you have to distribute the rental income or you will have tax complications.

Brendan
 
Re: Office Purchase


I am sorry but that is possibly the worst advice I have seen on AAM. Brendan, you may have you head in the sand re house prices, but the rest of the country is waking up to the fact that they are going DOWN. Were Louthman to take the maximum equity out of any house he has, he would severly expose himself to short to medium term equity problems.
 
Re: Office Purchase

Brendan said:
I wouldn't even discuss it with your accountant or solicitor, as they might mislead you.

You are always better off buying a property in your own name and letting it to the business.
Click to expand...

The best advice I have seen yet on this website. I personally know somebody who would have saved a fortune if they had heeded the above advice years ago, but they were misled by their professional advisor. The person now has the property owned by the limited company and if he was to sell it to get the money, he would pay a fortune in extra tax.
 
Re: Office Premisis: Should I personally purchace it or should the company?

LouthMan said:
My business is in the North ...
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This is first, and the most important, line in this discussion.

The property and the tax consequences of its purchase will be determined by UK tax law. The corresponding Irish rules are largely, if not totally irrelevant and issues such as IHT and corporate residence that are usually irrelevant in this sort of discussion may well have profound implications here.

In this context, advising the OP not to "even discuss it with your accountant or solicitor" is reckless to say the least. Anyone who lauds this as good advice clearly doesn't know what they are talking about.
 
Re: Office Premisis: Should I personally purchace it or should the company?

Using more relaxed UK tax rules I know that in the past your self administered pension scheme could purchase the property allowing the rental paid to be fully allowable from the company's viewpoint whilst the rent received is not taxable as it is in the pension scheme. Also any deposits paid could be treated as a lump sum contribution and any extra payments by the company can be treated as a further contribution - early repayment of loans, etc. An independent trustee would be needed. I hope the rules have not changed since I practiced in the UK but your accountant may be able to advise you further.
 
Re: Office Premisis: Should I personally purchace it or should the company?

Sorry. I overlooked the point about the North, so I will qualify my advice a bit.

Do your own research. Make your own provisional decision. Then run it by your accountant to see if the differences in tax laws change your decision. My understanding is that, under UK tax law, you are still better off buying the building personally, especially if you are planning to sell the business.

Be sceptical about the advice of your accountant, unless it is extremely well argued. You might be lucky and get an accountant who understands the issues and gives you good advice. Or you might be unlucky and get an average accountant who gives you bad advice. I see the results of bad advice all the time.

Brendan
 
Re: Office Purchase


The advice still stands whether house prices rise or fall. As long as the OP can continue to make repayments on the mortgage, the value of the house is irrelevant.

He will probably be able to borrow at 1% cheaper, which will be hugely signficant and will outweigh any other hypothetical considerations.

Brendan
 
Re: Office Premisis: Should I personally purchace it or should the company?

Brendan said:
Sorry. I overlooked the point about the North, so I will qualify my advice a bit.
Click to expand...
...
Brendan said:
Be sceptical about the advice of your accountant ... you might be unlucky and get an average accountant who gives you bad advice. I see the results of bad advice all the time.
Click to expand...

 
Re: Office Premisis: Should I personally purchace it or should the company?

Just because the business is in the north (a company presumably) does not necessarily mean that it is subject to UK tax.

The residency of a company and its liability to tax is governed primarily by the residence of its directors.
I don't know if Louthman or his fellow directors are based north or south but this is relevant to any advice given.
 
Re: Office Premisis: Should I personally purchace it or should the company?

Importer said:
Just because the business is in the north (a company presumably) does not necessarily mean that it is subject to UK tax.
Click to expand...
Indeed, but the location of a property in the north will have at least some UK tax consequences.
 
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