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bigduckontax, Accountant
Category: Tax
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I c0-own a property portfolio with my husband, all buy to

Customer Question

I c0-own a property portfolio with my husband, all buy to lets. I have recently started making more money and it will bring my tax liability higher. I am thinking of starting a limited company and run the properties thru the company. My husband is already on the 40% tax bracket so I will make my 19 year old son a member of the company. I am not sure if I should have a UK limited company, US limited company (I am american) or a British Virgin Islands one as I read that they are pretty easy and save you a lot of money (the latter) what would you recommed.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi None of them as if this is just rental income then you cannot operate through any company - even if you could it would cost you in capital gains and stamp duty to transfer these properties into a company, and furthermore the days of "tax efficiency" in offshore structures no longer exists due to the so-operation and sharing of information between the various countries.And as all the tax regimes have changed with properties placed in offshore mechanisms you still would;d not avoid UK taxation on the rents or future sale of any of the properties. Your only way of taking this forward is perhaps considering paying you son a salary (so employ him) but then what would he actually contribute to the situation , as he has to perform some duties. Or to transfer the a share of ownership to him form the proeprties - but again this would trigger a capital gain and a stamp duty position. The only other option I can advsie is if you perhaps open a limited company to provide just repairs/maintenance and collection of rents through the company from which the company is paid for that service (which your son could run) however the properties would still remain outside of this structure as would the gross rental position. I wish I could offer you a more tax efficient answer - but I am afraid the above is as good ad you can take this forward. Let me know if you have any further assistance with my response ThanksSam
Customer: replied 2 years ago.
Thanks for your answer. No, I don't wanna transfer them to the limited company, that is not what I said. I said run the properties thru the company... what I mean by that is that the limited company will manage all the houses.... which is the second thing you mentioned. Also you did not mention the British Virgin island limited company
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly, the use of a limited company in a tax haven like the BVI is attractive, but you will have seen the adverse media publicity against such firms as Amazon, Starbucks, Vodafone and the like who all employ similar tax avoidance measures and I cannot help thinking that legislation to limit that sort of activity is inevitable. Furthermore operating a company in tax havens does not come cheap, it is big business there and could gobble up a great deal of the company's profits. My colleague has suggested that the company be used to manage the properties and this is a possibility with a final solution being the net rentals payable to someone. If that someone is you then you avoid no tax liability, your position is unchanged, If a third party receives remuneration then that would, of course, be allowable against the company's Corporation tax (CT) [20%] position. As you and your husband own these buy to lets I can see HMRC casting a very jaundiced eye when viewing such arrangements, particularly when the rental income of the pair of you suddenly drops from earlier positions. I am so sorry to have to rain on your parade.