Commercial rent?

peaman

I have a ltd company client that rents premises that is owned by the sole director.

The premises is a commercial property with a 900+ year lease. The company is paying £850pw for the rent, which is apparently about the going rate for this size/type of premises.

The problem is that the director is paying way too much tax at higher rate. He also receives a pension (around £9k) and a salary from the company of £30k plus.

I have not long taken over the client, the previous accountant did not like dividends, so all monies were taken from the company as PAYE. If there were any profits left at the y/e he would vote bonuses via PAYE to reduce the CT liability. I am glad I was sitting down when he told me this and showed me the figures.

I obviously want to reduce the higher rate tax, so I told him that we should reduce the directors remuneration and start paying dividends, but I want to know what to do with the rent.

I assume there are rules which can stop him from reducing the rent to whatever he likes, is this correct?

Also, would it be best to put the premises into a ltd company, what are the problems?

To further complicate things, he would like to retire in the next 5 or so years and would like to pass everything (business and premises) to his son (shareholder) in the most efficient way.

Would appreciate your advice on this?