Property and Limited Company

anniem Registered Posts: 1,326 Beyond epic contributor 🧙‍♂️
I haven't had a great deal to do with properties and need some help.

Client exchanging on a new property with several tenants in next couple of weeks.

They have one business and also rental income from other properties, but are no longer VAT registered.

New property is some way from where they live and they are concious of the cost of fuel (and unclaimed VAT).

They are considering setting up a ltd co to 'own' the property.

Any advice, thoughts, recommendations, please?

FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire


  • T.C.
    T.C. Registered, Tutor Posts: 1,448 Beyond epic contributor 🧙‍♂️
    Why do they want to set up a limited company? What benefits are they expecting from that? They should be careful if they have a mortgage as the company may not allow them to transfer to a limited company.
  • groundy
    groundy Registered Posts: 495 Dedicated contributor 🦉
    Are the properties Commercial or Residential?

    If residential then the business would be exempt from VAT so no Inputs to reclaim anyway. If commercial you need to know whether there is an option to tax on property. This may be obvious if the sale price includes VAT.
  • jamesm96
    jamesm96 Registered Posts: 523
    I can't really see why they'd want to incorporate. As the guys above have said, it makes no difference on the VAT; it'd be an exempt supply (if it's residential) so they won't get any of the VAT back on the fuel. There's no NI saving to be had either as they won't pay any on 'personal' rental income.

    The LTD status doesn't even really provide any financial protection; if the tenant stops paying or there are other financial difficulties resulting in non-payment of the mortgage then the property can still be reposessed from the company.

    Perhaps there's a slight benefit in that any negative equity if the property ever were repossessed would not be recovered from individuals, but the mortgage would have to be on a high LTV for that to be a risk.
  • anniem
    anniem Registered Posts: 1,326 Beyond epic contributor 🧙‍♂️
    Thanks for all your feedback. I couldn't see any advantages but wondered if I was missing something!

    The property is all residential, so exempt supply and they can't reclaim any input VAT.

    They thought there would be a tax saving, but didn't realise that they would need to pay CT!
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
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