Purchasing land in personal or Ltd company name

by Readers Question

9:10 AM, 18th February 2019
About a month ago

Purchasing land in personal or Ltd company name

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Purchasing land in personal or Ltd company name

I am looking at buying a plot of land opposite my own main residence. It is intended for my 17 year old daughter so I can build a house and she can later decide either live in the property or rent it for an income and or have the option to sell it in the future.

My question is should I buy the plot in the name of a limited company or my own personal name. Also how this will effect the purchase of building materials etc?

Just not sure which way to go.

Many thanks

Kev



Comments

Neil Patterson

9:13 AM, 18th February 2019
About a month ago

Hi kev,

I few key questions are if this is going to be a one off and are you gifting the property to your daughter?

Kulasmiley

9:18 AM, 18th February 2019
About a month ago

Hi Neil.

At some point all my properties will be gifted to her. But for this I am thinking I should buy the plot for cash circa 25k then get planning permission then a self building mortgage and purchase materials.

I would like to reclaim the vat on those materials but think I need to register for vat under that sole purpose vehicle?

I don’t think there is 3% stamp on purchase at 25k. It’s all about the tax position when I leave this fair land and what I could claim on materials etc

JO CHAPMAN

11:53 AM, 18th February 2019
About a month ago

If you are building for you or your family to live in the property you can reclaim all of the VAT on building materials within 3 months of completion. You do not have to be VAT registered to do this. Builders and contractors charge 0% VAT on new builds.

Tim Rogers

13:29 PM, 18th February 2019
About a month ago

For the VAT, Jo has covered that above.
A further alternative would be to buy the land in trust for your daughter. Depending on the exact age of your daughter, might you delay until she is 18 and buy the land in her name?
As for 'gifting all your properties', seek advice as there are many pitfalls and I'm told that HMG are looking very hard at this as a further possible taxation revenue.

Kulasmiley

14:01 PM, 18th February 2019
About a month ago

Thanks for your comments all.
I guess then the question is there an advantage of buying in ltd co or personal name?

Kev

Tim Rogers

11:59 AM, 19th February 2019
About a month ago

Reply to the comment left by Kulasmiley at 18/02/2019 - 14:01
If you buy in a Ltd there is the consideration of the companies house / accounts overhead in time, effort and cost.

If you structure the ownership of the company in such a way that your daughter has the majority, ( in due time / once 18), whilst you retain the control. Then you can deal with everything but when it comes time to pass it on only the small remaining part switches ownership and would currently be of interest to HMG.

ie, imagine 1000 shares, you have 1 share your daughter has 999, then the value of the company assets is split as per the shares. Hence once you have the land and have built the house only 0.001% of the value switches.

You might consider buying the land in your name, then moving it across into a company once your daughter is 18 and before you start building.

Although my own portfolio is structured like this, I have no experience of how the offset of the new build costs would work for sure. However I think, ( stress think), that the costs would become a debt owed to you from the company, but the resultant value would be an asset of the company. Accordingly you could gift the costs and when you reassign the final 0.001% of the company, pay appropriate minimal tax on the 0.001% of the company value, if required.

There may also be an advantage to splitting the company ownership between your daughter and wife only, whilst you have the cost debt in your name.

There is a delicate balance here between corporate tax, personal tax and inheritance tax, you should be able to completely avoid CGT. I would advise having professional help with this process, both legal and accountancy.


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