Company director renting personal assets to company.
Monsoon
Registered Posts: 4,071 Beyond epic contributor 🧙♂️
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.
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.
0
Comments
-
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.0 -
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.0 -
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'.0
-
We have done this for different reasons with a Chiropractor client who bought an Xray machine. He then leased it to his Ltd company.0
-
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
Dean0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 318 NEW! Qualifications 2022
- 161 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 87 AAT Level 4 Diploma in Professional Accounting
- 8.8K For accounting professionals
- 23 coronavirus (Covid-19)
- 272 VAT
- 92 Software
- 273 Tax
- 135 Bookkeeping
- 7.2K General accounting discussion
- 200 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership