Company director renting personal assets to company.

Monsoon
Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
To me this semes to be a no-brainer, but I don't think I've ever heard of it being done, so I am guessing there must be a reason?

Director owns, say, £30k of assets. He doesn't want to sell them to the Ltd as he wouldn't want to lose them in the case of insolvency. The assets are used in his trade, which he runs through the Ltd.

So, he has a "rental business" where he hires the tools to his Co, claims capital allowances/ expensed equipment charges on them, broadly a nil gain nil loss situation and essentially shifts the cost of the assets to the company, thus creating a legitimate tax deduction. Even if there is a profit, it won't be more than the class 4 limit, and will qualify for Class 2 SEE, so it's only ever going to be taxed at 20% in the company or 20% as an individual.

What's the catch? I can't see one.

Assume any additional accountancy fees are outweighed by tax savings - because that's the only thing I can think of that would stop it being doable.

Comments

  • deanshepherd
    deanshepherd Registered Posts: 1,809
    I don't see any tax savings. At best it appears tax neutral.

    Two sets of accounts and two tax returns for the sake of protecting the assets in the event of an insolvency seems a bit excessive but if he is that concerned then it is certainly an option.
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Thanks Dean :)

    Tax savings on £30k are significant.

    If he keeps them personally and uses them in the business and doesn't claim anything for them, he is losing tax relief on £30k. Putting the assets in the company is not an option.

    Thanks - glad there isn't anything glaringly obvious that I've missed as to why it doesn't happen.

    It will probably take 20 minutes work to put this in place and on the tax return. I can't charge nearly £6000 for that, so I think he is onto a winner.
  • Fingersan
    Fingersan Registered Posts: 84 ? ? ?
    I can't see a problem with that, I have a similar situation with one of my clients. The only advice really is to make sure that the plant is being rented out at a 'market value'.
  • groundy
    groundy Registered Posts: 495
    We have done this for different reasons with a Chiropractor client who bought an Xray machine. He then leased it to his Ltd company.
  • Dean
    Dean Registered Posts: 646
    It's an asset protection exercise not really a tax one. Think of it as an "insurance" if you will and the premium is the additional accountancy fees.

    Regards

    Dean
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