Property Investment Through Limited Company | Smart Company Structure For Your Property Business
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- เผยแพร่เมื่อ 28 มิ.ย. 2024
- If you are investing in property you will want to do this through a Limited (Ltd) company. But there are limited companies and there are SMART limited companies for your property investments. In this video, Mark Alexander of Property 118 and Ranjan Bhattacharya discuss smart limited company structures for your property business.
Chapters:
00:00 - Introductions
03:50 - What Is A Smart Company
05:58 - All Shares Are Not Equal
07:35 - Smart Structure For A New Company
08:45 - Capital Gains With Smart Company Structures
13:35 - HMRC's Viewpoint
16:40 - Optimum Trust Structure For Those Getting Started
20:10 - Why Do You Need Multiple Companies?
24:35 - Smart Company Structure For Joint Ventures
26:10 - Benefits Of Pop Co - Op Co Structure
29:25 - 'Blood Line' Planning
34:28 - Trusts
36:40 - Consultation
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So much more to think about now. Great video
Absolutely fantastic video. Thanks for sharing.
Fantastic videa, very informative as always! cheers Ranjan
WOW. Great information. I'm starting out on my property journey and will be getting proper tax planning advice. Thank you 👍🏾
Great interview. Very informative.
Really informative - so much to think about. Thank you
Fabulous video world class advice 👍🏻
Excellent thanks
Can you guys do a video where you walk through setting a company in this structure up in companies house?
yes please I would like this
It only costs £12 just go to the government website, start a limited company fill in your details and select the nature of your business, this could be “buying and selling of own real estate”
I would like to know as well..
Very informative. I have to get my company structured correctly
Brilliant ;)
Awesome stuff. Now I need to make enough dough to make it worth the money and efforts:)
I really like your videos Ranjan.
Fantastic work! Let us cook for you so you have more time to learn this valuable info
Amazing content 👏👏
Ranjan, could you please do a video on commercial property adverts. I don't think i have seen any video which explain how to make sense of any commercial property information provided on property websites. For beg. Commercial prop Investor its a pain to read for example rightmove and try to understand what is on the offer. Thanks
Thats a good idea. If others agree please like this comment. If it gets more than 10, thumbs up, then we will do it!
Plus 1
@@ranjanbhattacharya-succeed7617 Brilliant idea, a lot of terms banded around that don't mean a lot on first glance. Lets do this!
brill content !!!
Great video
The best Property Guru Ranjan Bhattacharya!!!!!
Yes, he is the best Guru in my eyes too.
Great advice thank you.
On a Triangle company set up, Does the Holding Co pay tax on profits brought from the Pro Co and Op Co which it owns?
Lots of information got to watch it twice.
Much appreciated. Thank you
Thank you for this very important information message for a long term goal dai.
Great video as always.
Question: we have an off the shelf SPV limited company which has purchased 2 residential properties this year and has yet to generate income (refurb work talking it’s time).
How easy would it be to change our off the shelf over to this smart structure and what would the entire cost be?
Great
Great interview Ranjan. Especially liked the way you recapped what Mark said, Very helpful to hear the same detailed information expertly summarised. You should be on the BBC instead of that smug Peston fella!
Thanks for posting the video. One thing I don’t understand is that if the growth shares don’t have a value until they are reunited with the voting shares, how have you moved any value out of your estate? Surely all of the value is with the shares that have at least 75% of the voting rights and the IHT tax point will be when they are transferred?
Transferring a property into a limited company (from personal ownership) at minimal cost
Hi, is 3.59% apr fixed for 2 years a good deal? Also which buy to let mortgage companies would you recommend.
Hi Ranjan and Mark, it is great information. Please could you advise for a BTL property that has already been bought before setting up a Ltd company? Would it be worth to move it to Ltd company or leave it as on your own name?
Hi from Hong Kong , would love to invest in Uk, trying to learn the law and regulations here, these are really good videos! Thanks
Are you interested in a JV in UK? I have been investing in residential properties since 1989; we may be able to explore some common ground.
This is great information - how would you go about structuring this if one does not have children?
Ranjan thanks a lot for all the valuable info that you put out! Please can you talk about how one can pay private school fees using funds from their property company.
Thanks again.
Can we?? I didn't even had a tiny clue about the possibility of paying private school fees from the property company. Thanks for bringing this to highlight here in the comment. I will start researching about it now.
Great info here. Loved the detail. However, so disappointed in the amount of adverts. Really difficult to get flow
Use an chrome extension pal... google how to ad block
Do one on issues with surveys and what could make an sale fall through.
Thanks
So, would you say LLP is more suitable for older person (55+) with intention to have a couple of property?
Please can we have a video on CGT / ER?
Thanks Ranjan and Mark. I am just starting out in the property business having purchased my first place in my own name aged 30. I am now looking to purchase my next property and considering doing so in a smart Ltd company as per your advice. However, the tax planning considerations regarding 'Freezer' and 'Growth' shares seems very focused on handing the gains on to others. So early on in my journey I am not really in a position to consider who I would hand these gains on to. As such If I am wishing to retain the capital growth and profit myself is this still the most appropriate model to use?
Hi Tom, did you get any response to this? I find myself in a very similar position.
@@jean-pierreduplessis2064 I didn't get a response but have continued down this path to the conclusion of using alphabet shares without the need for a trust.
@@tomreed8605 thanks for confirming. Good luck with your future purchases
Thanks Ranjan and Mark. My question is if you have a Holding Company (HoldCo.) that owns the SPVs + OpCo. (Lettings) + PropCo. (property investments), I presume the HoldCo would be the 'Smart Company' with Growth/Freezer shares? The subsidiaries would just send profits up to HoldCo. which can then disperse at will. If HoldCo. has its fingers in many pies (different industries/investments) then is it worth having the property investments and SPVs under the PropCo. subsidiary instead of HoldCo.?
Would like to know this too
Best Contact Property 118
Does anyone know if capital allowance is applicable to BTL property?
Whether capital allowance works differently for Ltd to LLP or in a situation where an individual owns a couple of BTL properties (but filed earnings from BTL via simple self-assessment).
Much appreciated. God Bless. Peace.
How about having multiple discretionary trusts to get around periodic charges below the threshold?
I found all this to be so interesting especially as I just went and bought two properties on an ad hoc basis. ... No company etc. In 2016. I do have my old flat bought £19000 now worth £190000 rented out now for more time than I ever lived there and I can't sell it without paying loads of capital gains tax although, I extended the lease £15000, refurbished £15000 and would have an allowance of £11000 plus the time lived in to offset. All that would only total £50000 max. So I would be paying capital gains tax of 28% IE £42000. That's a lot. How can I leave it therefore to my son . I think I saw something about having to have will. And you can leave upto £150000 without inheritance tax to your kids. Anyway. I realized there is no point in investing any further although I feel like I want to and I m already older than you two as I am just about to retire and have more time!
Giving loan to your son from your company: If my son got loan from my company, obviously the bank want to know where the deposit come from when he apply for a mortgage. The lender may insist that the deposit has to be a gift or own savings rather than a loan from his parents company. My question is how easy is for my son to get a mortgage when he borrow money (from my company) for a deposit for his flat?
Rajan do you have any property tax planning training program for new accountants who want to step into property tax planning?
Smart company looks great from IHT angle
But won't there be an issue with getting mortgage mortgage when having kids or trust as growth shareholder
Thank you for this brilliant video. I have three questions.
1- In the holding company and subsidiaries structure the freezer shares are in the holding company?
2- What is the maximum percentage of shares that can be freezer shares?
3- What happens if the settlor of the trust dies and the business still carries on by the rest of the shareholders and they never liquidate the business, does the trust still have to pay the 10 year anniversary tax?
Thank you in advance for your respond
1) Yes
2) It depends on what you are trying to achieve. Usually it’s a significant percentage, ie 75% to 99.9%
3) Yes
You mentioned that the value of the freezer shares would be very low unless the properties are either sold or the business is liquidated, so my question is on each 10th anniversary the valuation would be very small because the trust assets are not sold or liquidated . Is this correct ?
Hossein Rezvani Correct, because shares in a privately owned company have very little value without voting or dividend rights.
Would it be good to set the HoldCo as offshore structure...something similar to what David Cameron and Georgy Osborne did with their deals...
Hehe !!
Ps my other question which won't apply to lots of people us if you have a final salary pension should you take the pension, take 25% lump and reduced pension or thirdly transfer it into ..... Something else ... Where you could take the money out , put in stocks or shares or gosh knows.
Hi if the new company is created and no memoridoun of articles etc created. Do you have to create this once you have kids etc. I’m a director of a New company with only 1 type of shares. Shall I create this freezer shares now I don’t have any kids at the moment
Please do a video on Family Investment Structure comparing it to LLP/Partnership/Limited company for reducing IHT liability
Have u been reading my mind? I am recording a video with mark smith and mark Alexander on this topic, later in the week. If you have any specific questions, please leave them here.
@@ranjanbhattacharya-succeed7617
Thank you so much for doing a video on it!!
The choice of people that you have picked to be in the video are phenomenal I love your channel and I love watching your videos. They are so informative and very clear. It would be great if you could use pictures and diagrams to explain things.
It’s a huge hot topic at the moment and more and more people are utilising FIC as a vehicle to shield from IHT. Please cover as many of the questions as you can listed below; I feel like most of the general public will be thinking about these questions!!
- Implications of CGT and SDLT to put the properties into the structure, and also to gift them to the adult children
- To explain freezer shares how exactly they minimise IHT liability
- How banks/lenders few about lending to all the different property structures eg. limited company, family investment company, LLP, partnership
- What would happen in the event that HMRC can overturn your tax planning
- In all the different property structures which are the most difficult to break up and which are the most easy to break up
- Can VAT be claim back in a family investment company, what about the rest of the property structures
- If you are looking to develop a property with massive gain, how would you structure this in a family investment company, in which order would you do it, would you put the property in the company first, then take out the loan, or start with a directors loan?
- Does the benefit in kind apply to properties held in a family investment structure?
- In which property structures do you not have to transfer mortgages?
- In a family investment company if the children hold shares which have no dividend rights how do they benefit from the income of the properties?
- How are directors loan can be used to your advantage to reduce income tax, and to reduce IHT liability
- Tips of things to put in the memorandum articles association
- How are family investment structure is protected or unprotected by divorce, bankruptcy of individuals
- What is a management company, and if it can be utilised in the scenario of a family investment company
- Can a family investment company’s value can be seen on a public domain?
Please please compare FIC to the other property structures especially to partnership, llp and limited company!
What position does beneficial trusts have in IHT
Forgive my ignorance, if one owns 1 A share with capital rights which represents 50% of the Ltd assets then he/she dies, would this one A share be sold to become part of an estate for inheritance tax?
Hi Ranjan, many thanks for this interview - best overview of this subject I've seen so far. I would be very interested to hear Mark's (and your) view on the type of hybrid business structures (essentially an LLP between an individual and a Ltd Co.) that are being touted by, for example, 'less tax for landlords' as the ultimate solution to avail of the advantages of property ownership as an individual and through a Ltd Co.
Maybe Ranjan, myself and Mark Smith should record a video about why it is extremely rare for Property118 and Cotswold Barristers to recommend Hybrid structures (i,e, partnerships or LLP's with one or more corporate Member's) and both the legislative and financing reasons for our stance?
@@Property_118 , Thank you for that. Out of interest what kind of structures would you recommend for older landlords slowing down and approaching retirement ? Thanks
To add with grown up children and grandchildren
@@woody412 interesting question, because that describes me perfectly. I suppose it depends on what their objectives are. A consultation would be the logical way forward - see www.property118.com/tax/book-a-consultation/
How does this apply to overseas investors
What is the right corporate structure to ensure you can draw the salary you need and protect inheritance in the most tax efficient way?
Great question. Video coming up Friday 30th Oct which will address this question
I currently own 4 hmo's in outer London, 1 of which is held in a company. Im looking to expand my portfolio gradually over the coming years. I have two young boys, whom I would like to inherit my properties, with obviously the minimal amount of tax to pay. I would also like them to play a part in the business and receive a small income from it when they come of age.
Should a simple discretionary trust be drawn up with a will and a small percentage of shares be given to my children. I know that I need to speak to a tax advisor/accountant about this but just wanted a few pointers if you would.
Thank you for all of your amazingly informative videos by the way.
Yes
Super confused now watching it again. The problem with these videos are they only touch the surface (teaser).
Hi Guys can you advise why we get mixed responses when talking to chartered accountants ref going incorporated. i have 6 soon to be 7 properties but advised not to go ltd unless earning over £100k. I still believe I should but I'm not the expert. Can you advise or do a video would be even better as this is surely what lots of viewers are doing before coming to you guys for services. Unfortunately we live in an unscrupulous world and we all like to check and double check we are not putting ourselves in any tax dangers etc. just a thought.
Won't constantly borrow money from a trust affect a person's credit score and therefore affect their ability to get further loans from conventional banks ? Thank you, great interview.
Highly unlikely
No. Because loans from a trust would not leave a 'footprint' on your credit file. (Its like if you borrowed money from a friend or family member with a written legal agreement. Its a loan but there is no mechanism for it to show up on your credit file.)
@@ranjanbhattacharya-succeed7617 How convenient 👏😂
@@ranjanbhattacharya-succeed7617 I should imagine it would be wise to register a legal charge on the property with Land Registry, though this kind of loan has lower priority in terms of rights to recover the loan compared with conventional banks/building society. Correct?
Many Thks very helpful as always! @18 min "costs a quarter of that" to set up, does that mean a quarter of £40,000 or £100,000?
2, Is it possible to rejig an simple one type of share existing company to amend it to a smart multi tier share structure, or not possible/too late in the day?
1) The typical cost of a Smart Company Structure as described, including the Discretionary Trust, Letter of Wishes, Wills and LPA’s is circa £10,000 +VAT.
2) Yes it is
Mark Alexander Property118 TV Hi, can this be done in stages to break up the costs .. perhaps setting up the smart company, drafting of memorandum of articles and issuing of abc shares .. then deal with legacy planning later i.e. trusts, letter of wishes, wills later?
John Reynolds the part you have explained is 80% of the cost, so the answer is yes but I do not recommend it
@@Property_118 I have heard that setting up company with many share holders may create additional concerns to banks/lenders and will increase the borrowing rate. How true is that in your experience, and this there a way to minimize the concerns from banks/lenders?
Gordon s Yes to both questions
I have aproched my accountant about tax efficient structure of my Company that still has nothing in it. I suggested my children come i. The Company with 25% each and asked about a and b shares. Then I asked him whether I should have a more tax efficient structure of my business and he said I was good like that. I’m about to do my first two property investments. Do I have the right accountant?
If an accountant has no experience of something they will normally advise caution.
If you ask me about skiing, I would tell you its dangerous and you get cold so don't bother. But thats a viewpoint of someone who has never been skiing in his life. So how useful is that viewpoint? Its always best to get professional advice from someone with direct experience of what it is you want to do.
Also accountants tend to look at the previous tax year and past figures. Tax planning and advice is about looking at the future. They are two different skillsets and its rare to find someone who does them both well.
You can book a consultation with Mark Alexander's team at www.property118.com/tax/
They know about this stuff and how to apply it to property businesses.
Superb answer from Ranjan. It is not possible for me to answer your questions fully without understanding your situation. Making young children shareholders could affect your ability to obtain finance though, so beware. Accountants rarely understand finance.
Some of them are hopeless, they just sit tight in their comfort zone and happy to take your annual fees.
I heard that if a business is sold, and the proceed is re-invested into another business within 2 years then capital gain tax does not apply.
I wonder if one happens to own a BTL property and you sell it to buy a bigger BTL property, can Mark (Property118.com) tell me whether the same principle can be applied (i.e. no capital gain tax paid as proceed went into another BTL).
Thanks in advance.
My understanding is that this wouldn't qualify. BTL isn't considered a business asset if you hold them outside of a company structure. Depends if you hold the property yourself or as a LTD company.
What if you buy your home through an Ltd company before getting married. Assuming the marriage breaks down if the ex- wife was not part of the original set up of the company, what is she entitled to?
We do not recommend buying your own home in a Limited Company - see ATED. In the event of divorce this would not provide any protection either. The Courts could order the home to be sold and/or a transfer of shares and/or payment to the spouse.
As Mark says, this is more about investment property. Owning your own home in a Ltd is a massive can of worms and you wouldn't want to go there.
Very bad audio from guest side
Thanks Ranjan and mark I have a small portfolio with 16 properties in my own name only also three in a limited company
I really need to sort it out asap
How to I contact you guys
Smart company looks great from IHT angle
But won't there be an issue with getting mortgage mortgage when having kids or trust as growth shareholder