Buying a buy to let through a limited company

Residential letting is not commercial for tax purposes. Commercial would be something like a guest house which has a business run on the premises. Retail would be commercial though as you say.

Reply to the comment left by “Simon Lever” at “26/09/2015 – 22:14“:

Hi Simon
Is there any chance you can clarify what you are saying. If you go through the link David posted then the exemptions are clearly posted from hotels to prisons. I don’t understand ‘let to a third party on a commercial basis’, a rule which you seem to think will exempt most properties. The following part ‘not connected to any persons’ is understandable.

We may have completely misunderstood this tax but I have consulted my son who is a chartered architect, having studied company laws. His interpretation is any dwelling owned by a company except those mentioned in the exemption list or held by certain bodies are liable for ATED if worth £500,000, in a few years time. If he is right then indeed it is scary and your comments accusing David of ‘scare mongering’ would be out of order. We have had a company, owing a property for 40 years and this is the most scariest thing to date!

You are making it too complicated. ATED applies specifically to residential property. As long as the owning company is run as a property rental business, a residential property that it owns that is let as a BTL on a commercial basis qualifies for relief

Read section 30 – 33 of the technical guide – it is very clear. All the terms are well explained and the examples include residential lettings.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/375750/ated-tech-guide.pdf

You should, imo, be more concerned about the impact of Basel III on any borrowings you have on your BTLs. You can pretty much put ATED out of your mind.

Reply to the comment left by “Jon Pipllman” at “28/09/2015 – 16:35“:

Hi Jon
Just to thank you for this posting on ATED. Luckily I’ve no borrowings on BTL’s!

I’ll take note if ever I do.

Basel III might be an opportunity for you then Yvonne

If it does push the cost of BTL borrowing up and the availability of BTL mortgages down, the cash buyer should find things a bit less competitive if she wants to add to her portfolio.

If you plan to buy a property from someone by buying the shares of the owning Limited Company, there may be a concern that the Company might have hidden liability. Although it may be a good way to evade the tax, the asset as well as the liability would pass on to you if you purchase a property this way.

This any use? Just put together some Advantages and Disadvantages of buying property to rent in a Limited Company.

http://goo.gl/3yzOEQ

Regarding the Envelope Tax from my understanding it does not apply to property that is soley rented out (except if you live in it or a family member does).

Reply to the comment left by “Adam Hosker” at “18/10/2015 – 18:44“:

That’s a very interesting summary Adam. Many thanks. I do have a few comments:
– (against) for those planning to retire from main employment within the next few years, the 40% (or 45%) tax issue may be a temporary one. After that, the 18% corporation tax, plus dividend tax will exceed the 20% lower rate
– (against) it’s less hard to switch into being incorporated than back out again
– (pro) in circumstances where the property is inexpensive and has been owned for only a few years, the capital gains tax might well fall within the 11k annual allowance, permitting a phased transfer of, say, one property a year with minimal penalty
– (against) we are all guessing what the government’s intentions are. What they do next may change the pros and cons all over again.

Reply to the comment left by “Alison King” at “18/10/2015 – 19:25“:

Good Input Alison, when I get time I will add some of those especially the last one. Its all still up in the air!

My financial advisor has said that you can have your rents and mortgages through a limited company but still take out ordinary buy to let mortgages in your own name to avoid the higher rates. Does anyone have any experience of this as it’s the first I’ve heard of it??