Property - company or personal ownership ?
Discussion
I own a few houses ( with the help of various banks)and rent them to students
Would I be better of seting up a company rather than keeping them in my name - a few are in joint names with my wife
Presumably the transferes would involve stamp duty etc but income could be classed as dividends, how would it effect capital gains tax ??
Also I have a couple of buiding plots I have been thinking of developing rather than holding should this be done through a company
Any info would be appreciated
Cheers
Would I be better of seting up a company rather than keeping them in my name - a few are in joint names with my wife
Presumably the transferes would involve stamp duty etc but income could be classed as dividends, how would it effect capital gains tax ??
Also I have a couple of buiding plots I have been thinking of developing rather than holding should this be done through a company
Any info would be appreciated
Cheers
When a company sell a Capital Asset which it owns, it will be liable to Capital Gains Tax on the gain (if any). The good news is that companies pay capital gains tax at the Corporation Tax rate (maximum 30%). Individuals tend to pay Capital Gains Tax at 40%. The bad news is that companies do not get the annual personal CGT allowance of £7,900 (2003/04 rate). This applies only to people, not companies. In addition, once the company makes the gain, the individuals who own the company will probably want to get their hands on the cash genrated by the asset disposal.. Once an individual extracts money from the company, they will become liable to Income Tax and possibly National Insurance. However, if the cash is drawn out in the form of a dividend there should be some tax savings for the individual and definitely National Insurance savings.
If the assets are currently owned by you personally, there will be a deemed sale at the time of the transfer of the asset to the company, even if no cash or other form of consideration changes hands. This may not be all bad as this would ensure that the personal allowances are triggered on the personal disposal and gain. The asset would then enter the company at current market values, therby reducing the value of future gains when the company finally disposes of the asset. Of course, assets held jointly with your wife will trigger TWO personal allowance amounts i.e £15,800 in total so that is worth considering when making the decision whether to transfer such assets into a company.
A company deriving its main income from "investments" rather than trading is not treated as well from a Corporation Tax point of view as a trading company eg. the £10,000 profit Zero Rate Corporation Tax limit does not apply. Companies which rent out properties are deemed to be investment companies and will be liable to Corporation Tax on the profits derived from their rental activities.
If the assets are currently owned by you personally, there will be a deemed sale at the time of the transfer of the asset to the company, even if no cash or other form of consideration changes hands. This may not be all bad as this would ensure that the personal allowances are triggered on the personal disposal and gain. The asset would then enter the company at current market values, therby reducing the value of future gains when the company finally disposes of the asset. Of course, assets held jointly with your wife will trigger TWO personal allowance amounts i.e £15,800 in total so that is worth considering when making the decision whether to transfer such assets into a company.
A company deriving its main income from "investments" rather than trading is not treated as well from a Corporation Tax point of view as a trading company eg. the £10,000 profit Zero Rate Corporation Tax limit does not apply. Companies which rent out properties are deemed to be investment companies and will be liable to Corporation Tax on the profits derived from their rental activities.
Gassing Station | Business | Top of Page | What's New | My Stuff