Property Tax: Using a Property Company to Save Tax

Using a Property Company to Save Tax By Carl Bayley BSc ACA

PUBLICATION DATE: JAN 2011
PAGES: 312
STATUS: IN STOCK

Overview Using a Property Company to Save Tax

This unique guide tells you EVERYTHING you need to know about setting up and running your own property company.

The potential tax savings are massive. For example, in one case study we show that using a company could result in a 42% increase in your after-tax income!

By using a property company it is also possible to get the taxman to completely fund any rental losses. For example, an investor with a £10,000 rental loss could end up with a tax REFUND of £12,000, thus turning a loss into a profit!

There are also a number of traps to avoid, so it’s essential to arm yourself with all the facts. This guide looks at the whole picture and explains ALL the tax consequences of using a property company.

The latest edition has was published in January 2011 and is completely up to date for both the 2010/11 and 2011/12 tax years.

What information is contained in Using a Property Company to Save Tax?

Using a Property Company to Save Tax is written in plain English and contains numerous examples and tax planning tips. Subjects covered include:

• All relevant tax changes made by the Coalition Government.
• … including all the important capital gains tax and corporation tax changes.
• A concise summary of all company tax benefits and drawbacks.
• A definitive answer to the “Should I or shouldn’t I use a company?” question.
• How you can earn an impressive 42% more profit by using a property company.
• How you can use a company to turn a pre-tax loss into an after-tax profit.
• Why a property company is perfect for long-term wealth accumulation.
• Why a company is ideal for those investing in property as an alternative pension.
• The enormous benefits of property development companies – how you can keep over 50% more of your development profit by using a company.
• How to get a tax refund of up to £480,000 AND enjoy tax-free capital growth by investing in the right kind of company.
• How to save up to £1.8 million in capital gains tax by structuring your company and its investments the right way before sale.
• The tremendous benefits of the company tax regime for interest and finance costs.
• Why relief for rental losses is far easier for a company than for an individual.
 

• When you should NOT use a company to hold your investments.
• The many non-tax benefits of using a company.
• How to borrow money in the most tax efficient way.
• The benefits of property companies for high earners with income over £150,000.
• The different types of property company explained: Property investment/letting companies, property development/refurbishment companies, property dealing/trading companies, and property management companies.
• How and when to transfer existing properties into a company tax free.
• How transferring existing properties into a company leads to lower future tax bills.
• A clear and concise explanation of corporation tax and how companies are taxed.
• How companies get tax relief for capital expenditure on rental property.
• How to go about setting up your company with minimum hassle and expense.
• How stamp duty and VAT affect company investors.
• How to extract profits from your property company and pay little or no tax.
• How to sell individual properties or the whole company and pay the minimum tax.
• Possible future changes to the company tax regime and their impact on property companies.
• Plus lots more… the book tells you absolutely everything you need to know about using a company to invest, manage, develop or trade in property.

About the Author Using a Property Company to Save Tax

The author is Carl Bayley BSc ACA, one of the country’s most respected ‘plain English’ tax experts. Carl is Senior Consultant at Taxcafe and author of some of our most popular tax guides. Carl is a regular speaker on tax matters, including his annual ‘Budget Breakfast’ for the Institute of Chartered Accountants. Carl is also a regular contributor to TV (such as the BBC’s ‘It’s Your Money’ programme), radio and national newspaper articles on tax matters. He is a member of the governing council of the Institute of Chartered Accountants in England and Wales.

Contents of Using a Property Company to Save Tax

Foreword

Chapter 1 Why Use a Company?
1.1 Introduction
1.2 Why the Government Likes Companies
1.3 Non-tax Reasons for Using a Company
1.4 Overview of Company Tax Pros and Cons

Chapter 2 Plain English Guide to Corporation Tax
2.1 What Taxes do Companies Pay?
2.2 Introduction to Corporation Tax
2.3 Corporation Tax Rates
2.4 Save Thousands with ‘Marginal Rate’ Planning
2.5 Future Corporation Tax Rates
2.6 Paying Corporation Tax
2.7 Cashflow Benefits of Using a Company
2.8 Company Tax Returns
2.9 Penalties

Chapter 3 Different Types of Property Company
3.1 Introduction
3.2 Property Investment Companies
3.3 Property Development Companies
3.4 Property Trading Companies
3.5 Property Management Companies
3.6 Companies with a ‘Mixed’ Property Business

Chapter 4 Property Rental Income and Expenses
4.1 Corporation Tax on Rental Profits
4.2 Calculating Rent Receivable
4.3 Expenses You Can Claim
4.4 Capital Expenditure You Can Claim
4.5 Furnished Lettings
4.6 Furnished Holiday Lettings
4.7 Interest and Finance Costs
4.8 Tax Treatment of Rental Losses
4.9 Other Property Investment Income
4.10 Lease Premiums

Chapter 5 Property Trading Income and Expenses
5.1 How Property Trading Profits are Taxed
5.2 Trading Profits versus Rental Profits
5.3 Properties as Trading Stock
5.4 Work-In-Progress & Sales Contracts
5.5 Capital Allowances for Trading Companies
5.6 Trading Losses

Chapter 6 Corporation Tax on Capital Gains
6.1 When Does a Capital Gain Arise?
6.2 How to Calculate the ‘Proceeds’
6.3 How to Calculate the ‘Base Cost’
6.4 How to Calculate the Indexation Relief
6.5 Making the Most of Capital Losses

Chapter 7 Capital Gains Tax on Company Shares
7.1 Introduction
7.2 Capital Gains Tax Rates
7.3 Entrepreneurs’ Relief
7.4 Entrepreneurs’ Relief for Property Investment Companies
7.5 Entrepreneurs’ Relief and Couples
7.6 Holdover Relief

Chapter 8 Stamp Duty for Property Companies
8.1 Introduction
8.2 Stamp Duty on Shares
8.3 Stamp Duty Land Tax
8.4 Stamp Duty Land Tax on Leases
8.5 Disadvantaged Areas
8.6 Zero-Carbon Housing
9.2 Residential Property Letting
9.3 Holiday Accommodation
9.4 Commercial Property Letting
9.5 Residential Property Sales
9.6 Commercial Property Sales & Purchases
9.7 VAT on ‘Build to Let’
9.8 VAT on Conversions
9.9 VAT for Property Management Companies
9.10 Interaction with Corporation Tax

Chapter 10 Saving Tax When You Extract Profits
10.1 Profit Extraction Principles
10.2 Salaries, Etc
10.3 Dividends
10.4 Income Shifting: The Gathering Storm?

Chapter 11 Personal vs Company Ownership
11.1 Introduction
11.2 Personal Tax Changes
11.3 Balancing Act
11.4 Rental Profits Kept in the Company
11.5 Rental Profits Extracted from the Company
11.6 Basic Rate Taxpayers with Rental Profits
11.7 Basic Rate Taxpayers Extracting Profits
11.8 Making the Most of the Basic Rate Tax Band
11.9 Investors with No Other Income
11.10 The ‘Optimum Scenario’
11.11 Trading Profits
11.12 Traders with Rental Income
11.13 Trading Profits Extracted from the Company
11.14 Basic Rate Traders
11.15 Traders with Alternative Forms of Income
11.16 Traders with Employment Income
11.17 Traders with No Other Income
11.18 Capital Gains
11.19 Summary
11.20 Older Property Investors
11.21 Tax Credit Claimants

Chapter 12 Making the Big Decision
12.1 The ‘Big Picture’
12.2 Types of Property Business Revisited
12.3 The Rental Income Position
12.4 Reinvesting Rental Profits
12.5 Capital Gains
12.6 Winding Up the Company to Reduce Tax
12.7 What if the Company Still Holds Property When Wound Up?
12.8 Long-Term Reinvestment
12.9 Retaining the Wealth
12.10 Long-Term Reinvestment Conclusions
12.11 The Benefits of Reinvestment for a Trading Company

Chapter 13 The Importance of Interest Relief
13.1 Introduction
13.2 Who Should Borrow the Funds?
13.3 Borrowing to Invest in Shares
13.4 Borrowing to Lend to the Company
13.5 Corporate Borrowings
13.6 Deeds of Trust
13.7 Rolling Up Interest In A Company
13.8 Personal Interest Relief

Chapter 14 How to Set Up Your Own Property Company

14.1 Who Can Help and How Much Does it Cost?
14.2 The Company’s Constitution
14.3 Other Company Formation Formalities
14.4 Changing Your Company’s Accounting Date
14.5 Dealing with Companies House
14.6 Statutory Accounts
14.7 Choosing an Accountant or Auditor

Chapter 15 How to Put Existing Property into a Company

15.1 Introduction
15.2 Gifts of ‘Business Assets’
15.3 Incorporation Relief
15.4 Which Relief is Best?
15.5 Pay Now, Save Later
15.6 ‘Trading’ Businesses
15.7 Furnished Holiday Lettings
15.8 Tax Planning with Incorporation Relief
15.9 Turning Investment Property into ‘Trading’ Property
15.10 Property Investment Businesses & Incorporation Relief
15.11 Other Investment Properties
15.12 Stamp Duty Land Tax on Transfers
15.13 VAT and Business Transfers

Chapter 16 Some Other Important Tax Issues
16.1 Close Companies & Investment Holding Companies
16.2 The Dangers of Private Use
16.3 Selling the Company
16.4 Benefits and Dangers of Multiple Companies
16.5 Short and Long Accounting Periods
16.6 Becoming Non-Resident

Chapter 17 Specialised Property Companies
17.1 Property Management Companies
17.2 The EIS Pub Company

Chapter 18 In Conclusion
18.1 Weighing it all Up
18.2 Future Tax Changes

Appendix A – Tax Rates and Allowances for Individuals
Appendix B – Forecast Future Tax Rates and Allowances
Appendix C – Marginal Corporation Tax Rates 2009 to 2015 292
Appendix D – Connected Persons
Appendix E – Retail Prices Index
Appendix F – Short Leases

Disclaimer

Chapter 9 VAT and Property Companies
9.1 VAT on Property

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