Buying premises through the company or personally?

poeticjustice

I am starting a Ltd company and am buying a premises for it. Should I buy it personally and rent it out to the business or just buy it through the business? Obviously there is no right or wrong answer but all opinions would be very much welcome.
Thanks

Paddy001

How are you funding the purchase?

poeticjustice

Getting a Commercial mortgage. It can either be in my name or done through the business

L.Jenkins

I'd be of two minds myself. If you purchase the premises personally and consider winding down the business in the future, it could become your own personal investment property. If things don't work out however, would you have any of your own personal assets tied to the premises?

If things don't work out and you own the premises, what could creditors take along side it? I'm just considering the good and bad.

Bandara

Why are you buying a premises for a new company ?

Why not rent and see how it goes ?

poeticjustice

L.Jenkins wrote: »

I'd be of two minds myself. If you purchase the premises personally and consider winding down the business in the future, it could become your own personal investment property. If things don't work out however, would you have any of your own personal assets tied to the premises?

If things don't work out and you own the premises, what could creditors take along side it? I'm just considering the good and bad.

I'm looking at the income tax side of things too. There's a lot to weigh up

poeticjustice

Bandara wrote: »

Why are you buying a premises for a new company ?

Why not rent and see how it goes ?

Because renting currently isn't an option in the area I'm looking at. I have looked at it though. You're right, renting would reduce initial risk but in the long term it would be better to buy.

Bandara

poeticjustice wrote: »

Because renting currently isn't an option in the area I'm looking at. I have looked at it though. You're right, renting would reduce initial risk but in the long term it would be better to buy.

Just a thought, you could approach the vendor with an offer to rent for a year at (for example) 25% above market rate with an agreement to either purchase at a locked in price agreed between you now, with a walk away cause for you after the 12 months (you may have to include a penalty fee of a few thousand to give the landlord comfort that it's worth his/her while)

I'm just reckoning if your business doesn't take off you'll be stuck with a property you don't want etc.

The get out clause could be invaluable to you.

Either way good luck with the business !!!

poeticjustice

Bandara wrote: »

Just a thought, you could approach the vendor with an offer to rent for a year at (for example) 25% above market rate with an agreement to either purchase at a locked in price agreed between you now, with a walk away cause for you after the 12 months (you may have to include a penalty fee of a few thousand to give the landlord comfort that it's worth his/her while)

I'm just reckoning if your business doesn't take off you'll be stuck with a property you don't want etc.

The get out clause could be invaluable to you.

Either way good luck with the business !!!

Yeah, I've already approached them with a similar offer. They have no interest in renting. Thanks for the advice though.

The premises could still be used for other things if the business fails. That's why I'm leaning towards buying in my own name.

Graham

poeticjustice wrote: »

Yeah, I've already approached them with a similar offer. They have no interest in renting. Thanks for the advice though.

The premises could still be used for other things if the business fails. That's why I'm leaning towards buying in my own name.

You need to talk to an accountant.

If you buy it, it the company going to rent it off you?
If the company pays rent to you, there are going to be tax considerations.
If/when you dispose of the property there are going to be more tax implications.
Are your lenders going to be looking for personal guarantees for a commercial mortgage?

Paddy001

You need to sit down with an accountant and run the numbers. If you will have significant capital borrowings, there is a significant tax benefit to having the property in the company - 12.5% vs 52/55% but on the flip side if you ever want to realise the value in your hands, the gain could be subject to CGT at 33% twice.

There are numerous other possible advantages as well as disadvantages which you should discuss with someone.

poeticjustice

Graham wrote: »

You need to talk to an accountant.

If you buy it, it the company going to rent it off you?
If the company pays rent to you, there are going to be tax considerations.
If/when you dispose of the property there are going to be more tax implications.
Are your lenders going to be looking for personal guarantees for a commercial mortgage?

Yes, the company will rent from me. Ill pay more on income tax but it could be worth it in the long term.
No personal guarantees required. Not an easy decision to make

poeticjustice

Paddy001 wrote: »

You need to sit down with an accountant and run the numbers. If you will have significant capital borrowings, there is a significant tax benefit to having the property in the company - 12.5% vs 52/55% but on the flip side if you ever want to realise the value in your hands, the gain could be subject to CGT at 33% twice.

There are numerous other possible advantages as well as disadvantages which you should discuss with someone.

Yeah, I'll be discussing this with my accountant. This is exactly my dilemma. My gut feeling is buy it in my own name but It's not an easy decision.

CIARAN_BOYLE

Also consider 2 limited companies.

One for the business and one for the property.

It's often done. Your accountant will be able to offer advantages and disadvantages.

Just another option to consider.

Trojan

Depending on your situation, there might be an option to buy the property through your pension.

mrawkward

Trojan wrote: »

Depending on your situation, there might be an option to buy the property through your pension.

Pension purchase not a runner at all. you cannnot let it to anyone or entity connected to you.
Having it in a company is a bad idea, when you go to sell it and realise the investment, both you and the company will be liable to capital gains tax.
If you really want it in your own name and can afford it. buy it. Do be aware of and check out if it is liable to VAT. That brings it's own set of issues, messy but not hard to sort. The rent received will be taxable at your highest rate in your hands with only the mortgage interest amount being tax deductible.

pedroeibar1

Agree on the double tax issue but I'm not sure about the pension purchase. My initial feeling is that it could be done if it was at arms length and handled via a trustee. I could see benefits that way where any gain would be realised by the pension fund..........Hopefuly the OP will tell us when he has had input from his financial advisors.

mrawkward

My understanding is the rules are pretty clear on property/pensions/tenant relationship being totally unconnected. Another issue arises, unless the pension fund is in funds to make the purchase, I seem to remember they are not allowed to borrow directly!!