Toronto Condo Top producer . What are the advantages and disadvantages of buying a house in the name of an individual or a company? In the UK, landlords who buy and rent (Buy to Let) have two main ways to hold property: one is to buy a house in the name of a personal loan, which is mainly applicable to small landlords who only buy a few houses; the other is to borrow money and buy a house in the name of a limited company, which is used by most professional landlords in the UK.
First of all, I’d like to introduce SPV to you. What is SPV (Special Purpose Vehicle)? This type of company is set up to buy property for rent.
The most important thing is the commercial risks of the operating company, such as the need to sell the company’s property and repay the company’s creditors if the company has debt.
The deposit of the down payment used as a property investment can be withdrawn in the later stage in the form of repayment by the directors without tax, and the interest generated by the loan in the name of the company can still be deducted from the financial expenses, if the family members are added as shareholders, you can use the amount of annual tax-free dividends for individuals.
The company’s net profit can be reinvested in the company’s account without additional personal income tax. Another advantage is that there is no need to complete the real estate sales transaction, and the ownership can be transferred to the family through equity transfer. This method is simple, fast and low-cost.
The real estate belongs to the company and exists in the form of shares. If you want to divide the property to others, you only need to sell the shares, there is no need to sell the property, and if there is no real estate transaction, there will be no (CGT), paid by the seller and (SDLT) paid by the buyer. It should be noted, however, that the transfer of shares will also involve stamp duty, which is called the Stamp duty reserve tax (SDRT), duty point of 0.5%. But 0.5 per cent is benevolent compared with SDLT’s usual 3-5 per cent tax.
If you want to give your property (SPV) to your child, you only need to transfer the company title to him without paying estate duty. Since it is a company, it will not die naturally, and there will be no estate tax.
Corporate profits tax, that is, 20% of net profit after excluding all costs (including interest, intermediaries, properties, etc.) (Osborne, Britain’s chancellor of the exchequer, announced that it would reduce this to 15%).
As long as your money is not withdrawn from the company, all your profits will only have to be taxed at 15%. You can continue to invest these profits in the company to buy more houses.
If you withdraw the money with a basic salary plus dividends, the annual tax rate of less than £30,000 to £40,000 is very low, and only those above £40,000 will be similar to personal income tax.
