Most of you will probably have heard of buy-to-let: you buy a property and rent it out to someone else. But have thought about renting that property back to your own company?
Okay, you might not be able to go out and buy offices, but the garage you use for storing your company’s stock or the summerhouse you built as your office could fall into this category.
Sounds like a bit too much hassle? Well, let’s take a look at the top reasons why you should consider it:
Sounds good doesn’t it and it’s not that difficult to set up. We’ve already helped a number of clients in the Aylesbury, Tring and High Wycombe areas become their company’s landlord and they are already benefiting from Corporation Tax breaks.
Let’s take a look at what you will need to do.
First things first, you need to work out if your property qualifies. You can charge rent on any property you own. This includes:
Charge as little rent as you wish, but remember, if the rent doesn’t cover expenses such as repairs and insurance, you will end up losing money and won’t benefit from Corporation Tax breaks.
If you use a room in your main residence as your office or for storage, then unfortunately it doesn’t qualify for rent-a-room relief. However, if you rent a room to provide accommodation for a company employee, then as long as the total rent received in a tax year doesn’t exceed £7,500, the rent will be tax-free.
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This is relatively easy to set up. First, you will need to have a formal lease agreement between you and the company, which states the rental amount and how often it should be paid.
You will then need to inform all the directors of your company at a board meeting with the terms of the lease agreement recorded in the minutes.
The company should then pay the rent by cheque or electronic transfer to your private bank account. This will ensure there is a clear audit trail and stop the tax man asking questions.
If you own the property with your spouse or someone else, then the rent should be paid to you both. You can either set it up, so the company pays all the owners proportionally, or you can choose to receive all the rent and then pay out the proportion due to the others.
Any rent you receive will be classed as income from land or property. But don’t worry about this too much, as your accountant should be able to sort it out for you. And if you’re looking for accountants in Aylesbury or Tring, we have lots of experience sorting out personal tax returns, so give us a call.
One of the top reasons people become their company’s landlord is because they can deduct a number of expenses from the rent. These include:
Over the years, we’ve successfully helped a number of clients around the Aylesbury, Tring and High Wycombe areas become their own company’s landlords. If you’re not sure that your property qualifies, or don’t know what to do next, give us a call, we will be happy to help.
Next time, we’ll take a look at some of the super easy ways to reduce your Corporation Tax bill.
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Palmers Business Support was founded to help ambitous small business owners grow their personal wealth and achieve their ideal work/life balance. With accountancy as the central pillar of our offering, we take the view that timely accounts and efficient compliance is the bare minimum our cients should expect.
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