Using a Property Company to Save Tax

Contents

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 Corporation Tax in Plain English
2.3 Save Thousands with 'Marginal Rate' Planning
2.4 Paying Corporation Tax
2.5 Cash-flow Benefits of Using a Company
2.6 Company Tax Returns
2.7 Penalties

Chapter 3 Different Types of Property Company

3.1 Introduction
3.2 Property Investment/Letting 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 Expenses You Can Claim
4.3 Capital Spending You Can Claim
4.4 Furnished Lettings
4.5 Furnished Holiday Lettings
4.6 Tax Treatment of Rental Losses
4.7 Other Property Investment Income

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 Introduction
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 The Importance of Taper Relief

7.1 Shares Held Since 6 April 2000
7.2 Shares Held Before 6 April 2000
7.3 So What's the Big Deal About Taper Relief?
7.4 Shares Held Before 6 April 1998
7.5 What if Shares Were Only Sometimes 'Business Assets'?
7.6 Shares Transferred Between Spouses

Chapter 8 Stamp Duty for Property Companies

8.1 Introduction
8.2 Stamp Duty on Shares
8.3 Goodwill
8.4 Stamp Duty Land Tax
8.5 Stamp Duty Land Tax on Leases
8.6 Disadvantaged Areas
8.7 Application to all UK Property

Chapter 9 VAT and Property Companies

9.1 VAT on Property
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 A Major Wealth Warning for 'Husband and Wife' Companies

Chapter 11 Personal vs Company Ownership

11.1 Introduction
11.2 Rental Profits Kept in the Company
11.3 Rental Profits Extracted from the Company
11.4 Basic Rate Taxpayers with Rental Profits
11.5 Basic Rate Taxpayers Extracting Rental Profits
11.6 Making the Most of the Basic Rate Tax Band
11.7 Investors with No Other Income
11.8 The 'Optimum Scenario'
11.9 Trading Profits
11.10 Traders with Rental Income
11.11 Trading Profits Extracted from the Company
11.12 Basic Rate Traders
11.13 Traders with Alternative Forms of Income
11.14 Traders with Employment Income
11.15 Traders with No Other Income
11.16 Capital Gains

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 What About Taxpayers on Lower Levels of Income?
12.5 Reinvesting Rental Profits
12.6 Capital Gains
12.7 Winding Up the Company to Reduce Tax
12.8 If the Company Still Holds Property When Wound Up
12.9 Reinvestment - Enormous Long-term Tax Savings
12.10 Retaining the Wealth
12.11 Long-term Reinvestment Conclusions
12.12 The Benefits of Reinvestment for a Trading Company

Chapter 13 How to Set Up Your Own Property Company

13.1 Who Can Help and How Much Does it Cost?
13.2 The Company's Constitution
13.3 Other Company Formation Formalities
13.4 Changing Your Company's Accounting Date
13.5 Dealing with Companies House
13.6 Choosing an Accountant or Auditor

Chapter 14 How to Put Existing Property into a Company

14.1 Introduction
14.2 Gifts of 'Business Assets'
14.4 'Trading' Businesses
14.5 Furnished Holiday Lettings
14.6 Property Investment Businesses & Gifts of Business Assets
14.7 Property Investment Businesses & Incorporation Relief
14.8 Other Investment Properties
14.9 Stamp Duty Land Tax on Transfers
14.10 VAT and Business Transfers

Chapter 15 Borrowing the Tax-efficient Way

15.1 Introduction
15.2 Who Should Borrow the Funds?
15.3 Borrowing to Invest in Shares
15.4 Borrowing to Lend to the Company
15.5 Corporate Borrowings

Chapter 16 Some Important Tax Issues

16.1 Close vs Close Investment Holding Companies
16.2 The Dangers of Private Use
16.3 Selling the Company the Tax-efficient Way
16.4 Benefits and Dangers of Multiple Companies
16.5 Commercial Investment Properties
16.6 Becoming Non-Resident

Chapter 17 Specialised Property Companies

17.1 Property Management Companies
17.2 Property Investment Syndicate Companies
17.3 The EIS Pub Company

Chapter 18 Weighing It All Up

Chapter 19 Future Tax Changes

Appendix A – Tax Rates and Allowances for Individuals
Appendix B – Forecast Future Tax Rates and Allowances
Appendix C - Connected Persons
Appendix D - More Complex Corporation Tax Calculations
Appendix E – Company Tax Returns: Special Cases
Appendix F – Retail Prices Index
Appendix G – Short Leases