Company/Partnership/Ltd Co advantages?

[Tipper]

Hi, New to this forum and I'm sure this has been covered before but not sure what to look for so thanks for your patience.

My wife and I have bought a rundown repossesion house with the intention of turning it into 3 holiday flats for income. This was driven by the Icelandic bank debacle and the now low bank interest rates.

Our architect is currently completing the necessary design and drawings for PP and we expect to be doing the conversion and renovation in the autumn.

The basic question is whether there is any advantage taxwise to do this as a partnership or company and should we be VAT registered?

[Telometer]

Very unlikely to be any advantage to using a company. Or to being VAT registered.

[Gordon999]

Personal tax rate can be charged at 40% over 38K income and capital gains on sale of investment property charged at 18%.

But small companies pay approx 20% tax on "profit" below 300K and capital gain tax on sale of business ( retirement ) - may be as low as 10%.

[Lawcruncher]

The question you pose cannot be answered generally. The answer depends on:

1. Your own and your wife's personal circumstances and plans for the future.

2. What you have done so far.

3. What you propose to do.

4. Whether any tax savings you may make will be outweighed by the costs of setting up and running a company.

You need to consult an accountant.

[Telometer]

You need to consult an accountant.

It is very tempting to suggest that. My suspicion though is that for a small venture such as this, with just one property, a company will:

1. Cost more in fees than it would ever save in tax.
2. Not save any tax anyway (otherwise you enter the issues of getting money out of the company).
3. May in fact give rise to a higher tax bill, rather than a lower one, once tax is paid in the ocmpany at 20% and then on dividends at 32%. At some point OP is likely to want an exit route. At this point, the company will pay corporation tax on the chargeable gain on the disposal at 20%, and then OP will pay CGT on the winding up at 18% (no entrepreneurs' relief will be available on the holiday lettings).

[Tipper]

Thanks all, I get the picture.

We'll just get on with it as a private project and keep it simple, ie income tax on profit/annum and CGT when we sell eventually. Input VAT is not helpful with respect to pricing and competition and a PITA anyway so will keep away from that too!

Thanks for the discussion.