Seeking advice

Morak Thun

Any advice on the following would be greatly appreciated.

To make a long story short, my father has a number of properties and is looking for me to take over fully in managing and maintaining them. Essentially I will be responsible for pretty much everything you would expect from a property manager, from finding tenants to collecting rent, plus I will also be responsible for the maintenance i.e. repairs, cleaning, gardening, painting etc. (One of the properties is student accommodation, so turnover of tenants is high, and the clean up after some tenants can be extensive)

I have been assisting over the last few years, but we are looking to formalise everything, given that I will now be taking over fully.

I am thinking of setting up a limited company. My understanding is that the costs for my services would be favourable to him as the fees paid would be tax deductible. Likewise, profits for the limited company would incur a more favourable rate of tax.

My own circumstances are that I am a public sector worker, and will be in receipt of a public sector pension when I retire in 17 odd years. I am not in need of extra money at this time, and my plan is to put all of the monies paid into the business and not take a wage. I hope to possibly cash everything in after I retire.

Is there much that I am neglecting to consider? Would setting up as a sole trader be preferable?

Many thanks in advance. I am clueless about such things.

terryhobdell

I think you need to get proper personal tax advice and pay for it.

Gloomtastic!

As far as I'm aware, as a landlord you can't charge for your time for repairs/maintainance against tax. You can employ an outside firm and claim for their costs but not your own.

Morak Thun

Thanks for the replies.

terryhobdell wrote: »

I think you need to get proper personal tax advice and pay for it.

I don't think really want to pay money for advice if the idea is fundamentally flawed from the outset, and that is what I am going to be told.

If it is a viable idea then of course I will need to get professional help.

Gloomtastic wrote: »

As far as I'm aware, as a landlord you can't charge for your time for repairs/maintainance against tax. You can employ an outside firm and claim for their costs but not your own.

Wouldn't my father be the landlord, and wouldn't I be that outside firm.

Gerard93

I am not an expert on this just my own opinion the Limited Co would collect the rent / Income you could then draw a wage from this to cover your time etc and you would be taxed on this income.
Where you would need to get professional advice from would be would the Company own the properties would there be an advantage to this but then you would be liable for capital gains tax on disposal of properties.

Hopw this helps somewhat before you do anything get professional advice.

Gareth Sherry

Hi Morak,

you could set up a limited company and invoice your father for services rendered.

The income made in the company less the costs will be your profit at the year end.

You will have to pay corporation tax of 12.5% on the net profits.

In addition if you don't distribute out your profits 18 months after the yearend you are liable for a closed company surcharge of another 20%.

Then assuming you were wanting to cash out in 17 years you'll have another 33% tax to pay on the gain in the company which in essence would be the accumulated reserves.

So you can see that method is not very tax efficient.

Alternatively, you could pay into a pension scheme from the company. The company would get a tax deduction for that...though ultimately you would be taxed on the income from the pension down the road.

Another consideration is VAT. If you will be charging over 37.5k you'll have to charge VAT. Presumably, your father is not VAT registered so this would be an extra cost incurred.

My advice would be to avoid setting up a limited company to provide these services. It will incur extra admin costs, filing duties and would be less tax efficient.

You can still invoice out the services as a sole trader though be sure to register for VAT if you end up invoicing more than 37.5k per year.

Either way, it's worth a couple of hours speaking with your accountant.

thanks,

G

Alan Shore

First thing you need to look at is do you need to register with the PSRA in order to provide these services.

Then the next question is the structure how much are you talking about each year?

You are providing management services so I don't think that the Professional Services surcharge would apply. VAT Would be a major issue so volume is key.

If you can take early retirement and you are not using up your standard rate band then you could access the funds at a lower rate than 52%. You might even qualify for retirement relief.

Go and talk to an accountant.

Morak Thun

Some great information guys, and a lot of food for thought

Many thanks.