Self Management via a Limited Company

by Readers Question

3 months ago

Self Management via a Limited Company

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Self Management via a Limited Company

Is it OK to do the self management of a property (its only one initially) via a separate company I own (100%)? Rent would be paid to the company, then the company pays me say 90% of the rent as the landlord and retains the 10% as a management fee.

I am already an employee of the company as I do other consultancy for it – and I genuinely am doing the management as an employee. I am not intending to do this service for anyone else. The company has no financial interest in the property and the AST is directly between the tenants and me as a private individual – the company is simply the managing agent as Foxtons or ReedsRains etc would be.

Benefit for me is that my rental income is reduced which helps keep me in a lower income tax bracket and I can take the 10% out at a later date tax free if I wish by simply repaying a directors loan I previously made to the company.

Would welcome any comments/feedback/watch-outs about this arrangement.

Tim

Comments

Neil Patterson

3 months ago

Hi Tim,

I am assuming it is a trading limited company and not an SPV precluded from different types of business.

Otherwise this is a very common question and yes you can own the company that manages your property, but the key is that HMRC will not allow you to hide profits and you can only charge what is reasonable for your area.

10% would most likely be acceptable with possibly up to 15% in London but do check this first.

Obviously you will pay additional corporation tax for the company.

Mark Alexander

3 months ago

I agree with Neil, the legislation in this regard is FA2009/s25 "Transfer of Incomes".

Please see http://www.legislation.gov.uk/ukpga/2009/10/schedule/25

Tim Nolan

3 months ago

Thanks guys for the feedback and the link to the legislation - much appreciated

Jireh Homes

3 months ago

Hi Tim - I have a similar option except lease agreement with me personally but not sure if sensible. Income to Ltd Co is taxed at 19% (Corporation Tax) and income drawn out of Ltd Co (where in excess of Base Salary and Dividend) is taxed at 20% (assuming Base Rate tax payer). So whilst Mgt Charge reduces SA Property Income this appears tax neutral.

So is this arrangement only sensible if the Lease is with the Ltd Co?

J C

3 months ago

My wife is employed by her own limited company (not SPV)and she charges 10% for managing my properties, but also would like to charge for sourcing and negotiating the property deals she does for me. Almost like a personal property portfolio assistant, she keep track on my mortgage renewal due dates, does all the phone calls to chase up solicitors and estate agents on deals etc... My question is what is a reasonable rate she could charge me for those work, she certainly work more than 30 hours a week on all the above work. Is 30% of rental income reasonable? I am pretty much hands off apart from making the final decisions on purchases and which of the tenant application I prefer to have.

Mark Alexander

3 months ago

Reply to the comment left by J C at 29/01/2018 - 23:28
I don’t know the answer to your question because your suggestion is so unusual.

The norm would be to partner with you wife and/or her company and to share beneficial ownership.

I recommend you to book a consultation with me, which comes with a guarantee of total satisfaction or a full refund.


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