As a general rule, it is theoretically possible for a company to buy a house for one of its directors. However, there will be certain things to consider when doing this. Companies buying residential property in the UK will pay SDLT at the higher residential rates. This is the case regardless of whether the company carries on a property rental or property development business. Additionally, the taxation implications can be rather complex and fraught with pitfalls if the company purchases the property for one of its directors. In this article, can a company buy a house for a director, we take a look at the options open to you and the process and mechanism involved.
Free Initial Telephone Discussion
For a free initial discussion on how we can help you with the legal aspects of a company purchasing a property for a director, get in touch with us today. We will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.
What are the options available?
To mitigate tax implications, the company could pay the director money as a dividend and then the director could go on to purchase the property.
Company purchase of house
The company could buy the house (or part of it) and rent it out to the director (at market value). This should not attract a Benefit In Kind.
Director borrows money from the company
The company could lend the full purchase price (or a part of it) to the director. If the director were to pay interest to the company of not less than the official rate (currently, 2.25% p.a.), there would be no Benefit In Kind – otherwise, there is a BIK on the cheap loan of the difference between 2.25% and whatever interest the director pays. However, the company articles should be checked to see if it is permissible to do this and if it is, a legal charge should be registered against the title of the property.
Share buy back
Assuming the director is also a shareholder, the company could potentially buy back some of the director’s shares in order to release capital to him so that he/she can purchase the property. As with all these options, it is imperative that both legal and tax advice is sought from a suitably qualified expert.
There will also be Capital Gains Tax implications. Remember that if the company buys any part of the house, and it is subsequently sold at a profit, the CGT exemption will be lost.
How we can help
We have a proven track-record of helping companies purchase properties. We will guide you through all the necessary legal due diligence and the very latest legislation in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact our Commercial Property Solicitors
It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.
To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.