Setting up a property management company?

by Readers Question

10:35 AM, 17th July 2018
About 2 years ago

Setting up a property management company?

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Setting up a property management company?

I manage my late husband’s portfolio of 8 properties. At the moment I have no other income as I’m so busy with these, but may in the future get a part time job. I have 3 children – 2 at university, 1 school.

Am trying to find legitimate ways of reducing my income tax with s24. I’ve been reading about setting up a management company at a fee of 15%.

Is this a good idea? How would I do this? Who would do it? Is it costly?

If it’s a goer, please could someone explain to me really simply how it would work and how I would save tax please.

Thanks

S Peck


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Comments

AA

19:25 PM, 17th July 2018
About 2 years ago

It is no longer whether it is legal, it is an absolute case of whether it is in the spirit of the legislation. That is what GAAR is.

Mark Alexander

19:28 PM, 17th July 2018
About 2 years ago

Reply to the comment left by Gromit at 17/07/2018 - 18:45
The HMRC non-statutory clearance office closed down a year ago. HMRC no longer provides non-statutory clearances for landlords. Instead they’ve updated their internal manuals, which are actually very good these days. If you pay for professional advice from an experienced, regulated and fully insured adviser, then you have recourse to their professional indemnity insurance if the advice is wrong. That’s why we always get Counsels Opinion from Cotswold Barristers on all of our recommendations, and why we also recommend them for implementation of any legal work associated with the recommendations we make.

AA

9:54 AM, 20th July 2018
About 2 years ago

Reply to the comment left by Mark Alexander at 17/07/2018 - 19:28
Mark - What period would this indemnity insurance cover ?Jf a tax structure is in place say 2020. Would there be cover to 2040 ? The reason why I ask is that HMRC have gone back more than 6 years to challenge structures which were perfectly legal but perhaps not in the spirit of the legislation.

Mark Alexander

10:04 AM, 20th July 2018
About 2 years ago

Reply to the comment left by AA at 20/07/2018 - 09:54
Good question, I don't know the answer so I have invited Mark Smith (Cotswold Barristers) to comment.

Simon Lever

9:11 AM, 21st July 2018
About 2 years ago

A managment company could work if you stucture things correctly.
If you set up a company to only manage your own properties then HMRC would try to use GAAR to say that it is merely a scheme set up with one of the main purposes being to reduce tax.
However if you make your kids shareholders then they can receive some dividends tax free.
If you know other landlords then you can offer them the service and if you can find other properties not owned by you then HMRC cannot say that it is not a legimitate business.
You would need to advertise your services as well to show that you are running a business. Other badges of trade such as insurance would also be necessary.
From your post it would seem that the main reason for setting up the company is to avoid tax so you need to find as many ways as possible to make it into a legimitate business for HMRC not to get too interested.

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