110v versus 240v at start of project

[Drellingore]

Thanks for the replies and thoughts, all. I appreciate people taking the time to offer their thoughts, even if it's (necessarily) blunt or not-in-agreement. Messages on forums rarely provide the full detail and nuance, so it's hard to get everything across and easy to misinterpret intent.

 

CDM2015 - thanks for the warnings, I've ordered some books. I've run multi-million pound businesses with staff across Europe, and architected big complicated IT systems for governments, enterprises and regulated financial enterprises. I'd be surprised if CDM2015 is an order-of-magnitude more complex than adhering to Google's third-party supplier security requirements. I do take this stuff seriously, much to the amusement of my neighbour who will happily break every regulation going and thinks it's funny when he sees me jumping through regulatory hoops

 

VAT and limited company - I'm pretty sure about this, and the accountant in question has several clients who have used the same approach. We have a company, which is a special purpose vehicle to design and build the buildings. It does not own the land (so there's no stamp duty involved anywhere). We contract the D&B to the company, which makes a profit on the exercise. One building is zero-rated because it's a conversion from a non-residential property to a residential dwelling; the other building may be either zero- or reduced-rated depending on what planning have to say about whether it must be a holiday let or not.

 

21 hours ago, saveasteading said:

You can't choose to be a business, then not a business. An individual but also a company. VAT rebates only apply for domestic conversions, with zero business connection.

 

I don't understand what you mean here. Whether I do the work as an individual or a business is irrelevant - zero- or reduced-rating is dependent on the purpose of the building when complete. The building has no business purpose when completed, and therefore satisfies Section 2.1.3 of VAT Notice 708 as previously mentioned. I'm not arguing for the sake of being difficult here, but I do feel a responsibility to any future readers of this thread to make sure that any assertions I make are as correct as they can be, and cited too.

 

110/240v - thanks for all the input, I was expecting this to be quite one-sided, but it seems there's a diversity of opinion. It sounds like I should buy battery tools and defer this decision until I need some hardcore tool that requires mains power

[saveasteading]

2 hours ago, Drellingore said:

can't choose to be a business, then not a business. An individual but also a company. VAT rebates only apply for domestic conversions, with zero business connection

I've just seen clients trying to be too clever.

Contractors too. By the time the taxman reaches them the business is bust, but they have some nice cars,  but will be watched for ever.

You seem confident, so good luck. If it works you may change the construction industry, but more likely the tax rules.

[Tosh]

6 hours ago, Drellingore said:

One building is zero-rated because it's a conversion from a non-residential property to a residential dwelling

My understanding is different, I would've thought that this is reduced rate 5%

[andyscotland]

3 hours ago, Tosh said:

My understanding is different, I would've thought that this is reduced rate 5%

Indeed, the section of VAT Notice 708 linked above seems pretty clear that conversions are only zero-rated if done for a housing association.

 

10 hours ago, Drellingore said:

VAT and limited company - I'm pretty sure about this, and the accountant in question has several clients who have used the same approach.

 

Fair enough. I would say that having several clients taking the same approach is not necessarily a useful guide unless one or more of them has had and survived an HMRC inspection.

 

VAT is complex and not all accountants are on top of the details. I arrived in a past job to discover a VAT assessment of ~£50k for incorrectly claimed input tax plus interest & penalties. The accountants (who were otherwise pretty good) had signed off the treatment originally and had almost exhausted the appeal process on arguments they had put forward and lost.

 

We had to appoint a specialist VAT lawyer/accountant firm who advised that the position the accountants had taken was hopeless both on statute and case law. Fortunately they were able to find an entirely separate basis to show we actually should have claimed the input tax and then charged an equivalent amount of output tax, which would have been fully reclaimable by our clients. So although the error was worse than thought, HMRC were not actually out of pocket overall. The Revenue's barrister eventually conceded that they were not guaranteed to win at Tribunal and advised them to rewind the appeal process a bit so they could cancel the case without losing face or establishing a precedent. It took about 18 months and still cost us five figures to defend, but a much smaller amount than revenue had wanted. We explored pursuing the original accountants for costs but quickly established that was a non-starter.

 

Since then I have always taken advice about any detail of tax law/accounting with a large pinch of salt.

 

10 hours ago, Drellingore said:

We have a company, which is a special purpose vehicle to design and build the buildings. It does not own the land (so there's no stamp duty involved anywhere).

 

Only mentioned stamp duty as you'd said earlier in the thread you were buying the finished property from the company.

 

10 hours ago, Drellingore said:

 

 

One other thought, it sounds like you're planning to live in one of the buildings - does your local authority have a Community Interest Levy and if so does your company structure get in the way of claiming a self-build exemption? We don't have CIL here but some of the figures I've seen on BuildHub over the years are pretty eye watering.

 

Edit to add: of course I would also take VAT and tax advice from an internet forum with a pinch of salt 🤣 so if you're confident your accountant knows what they're doing then best of luck and as they say in Poland "not my circus, not my monkeys" 🙂

Edited January 4, 2023 by andyscotland

[Temp]

What about the 10 year warranty? Dont companies normally need to pay a fee or be a scheme member to issue them?  And don't they require companies to fix problems first? Even if you don't plan in moving within 10 years I thought mortgage companies expected a warranty?

[Temp]

Conversions are zero rated BUT last I looked the procedure for getting there is different to new build.

 

New build: Builder/company zero rates everything to the self builder. Any materials the self builder purchases himself are standard rated but reclaimable by the self builder using the reclaim scheme.

 

Conversion: Builder/company 5% rates everything to the self builder. Any materials the self builder purchases himself are standard rated but reclaimable by the self builder using the reclaim scheme. Likewise the 5% charged by the builder/company can also be reclaimed. 

 

HOWEVER..

 

The self build VAT reclaim scheme is only available to people building or converting a house for themselves or a family member(?) to live in. It's not available for people doing a build for sale/profit. Some websites tell me the self build reclaim scheme is not available on a holiday let but is available on a second home  ( https://www.cronertaxwise.com/community/vqotw-diy-claim-for-a-holiday-home/). I think it would be hard to argue the house next door to yours is your "second home" but why not.

 

Properties built and rented out longer term (eg on an assured tennancy agreement) are not zero rated at all. If VAT has been reclaimed on one of these it may well have to be repaid. This has to do with the difference between zero rating and exempt.

 

VAT on rental income: My understanding is that if a holiday let is owned by a VAT registered business that reclaims the VAT on construction then they will also have to charge VAT on the holiday rental income. A private individual renting out the same property may not have to charge VAT?

 

You should also check the situation regarding the CIL exemption for self builders and apply for it correctly or risk loosing it.

 

I am not an accountant. I do not accept any liability for this information! Check it out yourself.

 

Edited January 5, 2023 by Temp

[Drellingore]

17 hours ago, andyscotland said:

Indeed, the section of VAT Notice 708 linked above seems pretty clear that conversions are only zero-rated if done for a housing association.

 

Thanks, good spot! It's actually VAT Notice 708 section 5 that covers this situation. Luckily I keep notes for the benefit of future-me, and those are more accurate than my forum posts  Apologies for confidently spouting mistruths.

 

17 hours ago, andyscotland said:

I would say that having several clients taking the same approach is not necessarily a useful guide unless one or more of them has had and survived an HMRC inspection

 

He did mention one client got inspected. HMRC wanted to know why, on a reduced-rate project they'd been reclaiming VAT quarter after quarter, but hadn't collected any yet. The accountant had to politely point out that build projects often don't get paid for until the build is finished  So that certainly backs up the claim that HMRC may suffer arse/elbow differentiation difficulties.

 

16 hours ago, Temp said:

You should also check the situation regarding the CIL exemption for self builders and apply for it correctly or risk loosing it.

 

Good shout. I did look at it once a couple of years ago and filed it under "don't worry about it," but as shown with the VAT situation I should be able to point to a particular bit of regulation/legislation before considering it a solved concern.

 

17 hours ago, Temp said:

What about the 10 year warranty?

 

A good question, for which I currently have no answers. I'll ask the main contractor I've been talking to what he does when people engage him directly to build projects.

 

16 hours ago, Temp said:

Any materials the self builder purchases himself are standard rated but reclaimable by the self builder using the reclaim scheme.

 

I'm not sure this is true. If presented with a zero-rating certificate, I believe suppliers can opt to zero-rate their supplies. If not, by running the build through a VAT-registered company the VAT can be reclaimed on a quarterly basis, which is better for cash flow than the self-build reclaim scheme.

 

16 hours ago, Temp said:

VAT on rental income

 

Sorry, I didn't provide enough detail here. The limited company is just doing design-and-build. We as individuals pay for the service once its complete. Any holiday letting activities may either be covered under self-assessment, or we might lease the right for another company of ours to run the holiday lets. We'll figure that one out nearer the time, but the SPV definitely won't have any involvement in future letting.

Edited January 5, 2023 by Drellingore

[Temp]

6 hours ago, Drellingore said:

22 hours ago, Temp said:

Any materials the self builder purchases himself are standard rated but reclaimable by the self builder using the reclaim scheme.

 

I'm not sure this is true. If presented with a zero-rating certificate, I believe suppliers can opt to zero-rate their supplies. If not, by running the build through a VAT-registered company the VAT can be reclaimed on a quarterly basis, which is better for cash flow than the self-build reclaim scheme.

 

I've never heard of suppliers zero rating materials to self builders. 

 

I only really mentioned self builders purchasing materials because even when they have a  Builder most seem to end up buying somethings. Some get a builder to construct the house to water tight stage then take over themselves and switch to hiring trades. 

[PeterW]

6 hours ago, Drellingore said:

e. If presented with a zero-rating certificate, I believe suppliers can opt to zero-rate their supplies.

Only for supply and fit - there has to be an element of labour included for zero rating. 

[andyscotland]

On 05/01/2023 at 18:29, Drellingore said:

Thanks, good spot! It's actually VAT Notice 708 section 5 that covers this situation. Luckily I keep notes for the benefit of future-me, and those are more accurate than my forum posts  Apologies for confidently spouting mistruths.

 

I don't understand how that's relevant. 708 section 5 is about output tax when a VAT registered entity sells a building either as freehold or on a long lease.

 

So if your SPV is going to own the building and sell it to you, it could be VAT registered, reclaim the input tax (5% for labour / supply & fit, 20% for materials), then charge 0% VAT when it sells to you.

 

But up-thread you said there's no stamp duty implications and it sounds like your SPV is just going to design & build with you as owner/client.

 

If so then your SPV will not be selling you a freehold/lease so that section of the VAT Notice is irrelevant?

 

Instead your SPV will be a "normal" service provider so will have to charge 5% VAT on all services to you in line with the earlier section of the VAT notice which as @Temp says you may then be able to claim back from the self-build scheme.

 

But in the latter case your SPV would have to be charging you enough of a markup to show that the entity/VAT registration was for the purposes of "trade". And therefore you will have to pay corporation tax on that profit inside the company, and presumably dividend/income tax to get the profit back out of the company.

 

Bear in mind that for the self-build reclaim (unlike business VAT returns) HMRC see & check every VAT receipt and I would think are likely to be extremely curious about a claim for a single end-of-project invoice, especially if they then identify that the supplier is a close company/controlled by you.

 

Which seems like a very convoluted & risky way to go just for the sake of speeding up the cashflow of input tax recovery.

 

On 05/01/2023 at 18:29, Drellingore said:

 

 

[Temp]

On 05/01/2023 at 17:29, Drellingore said:

 

Sorry, I didn't provide enough detail here. The limited company is just doing design-and-build. We as individuals pay for the service once its complete. Any holiday letting activities may either be covered under self-assessment, or we might lease the right for another company of ours to run the holiday lets. We'll figure that one out nearer the time, but the SPV definitely won't have any involvement in future letting.

 

This is what I was referring to..

 

https://www.trowers.com/insights/2020/may/tax-implications-of-the-temporary-letting-of-new-residential-units

 

In short it appears your intention matters. If you intend to build both  units for sale as dwelling then you reclaim the VAT. Definitely on one, possibly on the other if is going to be sold or occupied by a relative.

 

However if you or your "company" build one with the intention of leasing it out and then do lease it out you either can't reclaim the VAT or may have to repay the VAT if its been reclaimed already. And you have to pay VAT on rental income. People have been caught out by this but there are ways around it. I believe by selling the property to another entity so the first transaction is a sale not a let/lease.

 

 

 

[Drellingore]

Thanks for the thoughts folks. I took a while out of the project, hence the absence of replies. I'll take some time to dig through the above, my notes, and what the accountant has said.

[Nickfromwales]

8 minutes ago, Drellingore said:

Thanks for the thoughts folks. I took a while out of the project, hence the absence of replies. I'll take some time to dig through the above, my notes, and what the accountant has said.

Pausing is relatively cheap and bloody effective!

Feel free to come back and stir the embers  

[Drellingore]

I've done enough reading today to know that I've talked some absolute twaddle earlier in this thread. The end outcome is likely going to be the same, but the reasons I've given are wrong, so thanks for calling me up on this. I've learned more than I ever wanted to about VAT today!

I'll put my consolidated thoughts in this thread when I'm a bit more sure that I've finally got it straight, so y'all can point out where I've missed stuff and so future readers of the thread aren't misled.

[andyscotland]

9 minutes ago, Drellingore said:

I've learned more than I ever wanted to about VAT today!

 

I hit that day about 15 years ago and have learned a lot more about VAT since then 🤣

 

Congrats on your first BuildHub "hmm, I got that wrong" post. You are not alone

[Drellingore]

This has gone way off-topic, so I don't know if the mods want to move most of this thread to the VAT forum?

 

We'll leave the holiday let stuff out of the equation for the moment, as our plans have changed and it's looking more like there might be a couple of rooms that we could AirBnB, but that's way down the line and hopefully not a planning condition.

 

My current understanding, having spent yesterday reading VAT Notice 708, but not the HMRC VAT Construction Manual.

 

Our limited company SPV is VAT-registered and has one SIC code: 41100. It will be engaged on a design-and-build basis as described in VAT Notice 708 3.4.1. We have most of the build budget in a different holding company, which will lend funds (with interest) to the SPV. Upon completion the SPV will charge us for its services, making a profit in order to demonstrate genuine trading. We will apply for a regular mortgage secured on the property to pay back the SPV. As an SPV, it will then be folded after paying its tax liabilities, and the retained profit will be redistributed to us.

 

The build project itself will either be zero-rated under section 3, or reduced-rated under section 7. This depends on whether we'll be able to take the existing buildings down to ground level before putting the retained bits back up (the first type of qualifying building in section 3.2.1). If this is not possible then we'll default to section 7, which the build will be eligible for by merit of being a conversion of a non-residential property into a dwelling.

 

When the build is completed, if it was reduced-rated, then we as individuals will be able to reclaim any VAT charged by the SPV via the normal self-builder reclaim process. If it was zero-rated, there won't be anything to reclaim.

 

The advantages of this approach are:

• We can leverage funds in the holding company, meaning that we don't need expensive bridging finance. I last did the maths when corporation tax was 19%, and the overall cost of finance over a year was about 0.37% once inter-company interest has been charged, profits have been made, corporation tax paid, business asset disposal relief has been claimed, and capital gains tax paid. On a bridging loan at 0.5%pm, that would work out at 6.1% over a year.
• Cash flow will be better, as the SPV can reclaim VAT every quarter, instead of waiting until the build is complete.
• The number of invoices that need to be processed through the self-build reclaim scheme will be drastically lower.
• We can use all the business accounting software and processes we're used to, and have all the finance stuff firewalled off.

A probably incomplete list of things I was wrong about and misunderstood:

• Section 4 and 5 require the title to change hands, which will not be the case here. I was wrong to cite those as relevant.
• Certificates are not relevant here, as they're only for builds that are not dwellings ('relevant residential/charitable purpose'). I previously thought they'd be useful.
• Merchants will charge VAT on materials, and this is explicitly stated in 11.1. I'd previously thought they'd remove standard-rate VAT if presented with a certificate, which is wrong on two levels!

I look forward to finding out what else I've misunderstood before headbutting a wall for a few minutes  I've not looked into the self-build reclaim scheme much, nor the HMRC manual, so those are possible blind spots.

[saveasteading]

I would worry that you have published here that the company is formed solely for the benefit of yourself personally, mostly avoiding tax, with no intention to trade otherwise.

Then distribute the profit back to yourselves.

You get the advantages of cash-flow, and vat reclaim on plant and fees, which otherwise the VAT man would have.

 

That information is now at large for any googler to see.

I have not looked in the slightest for any backup on this, as to whether it is contrary to the principles of setting up a limited company' or re tax.

I just have some decades ( and hundreds of substantial projects) of knowing that the tax man mostly left us alone, but many clients and subbies seemed to have had frequent 'discussions', mostly when trying to be a bit too clever. 

They may often have come to an agreed solution, eventually, but meanwhile guess who holds all the tax, or issues a penalty which you have to pay immediately and then have to fight.

You might end up helping the tax man create new case law.

 

As I say, I don't know, and have not researched it. Maybe you are the first in the country to think of this, and it is legit.

The only way to know is to try it, and reserve a lot of money in case the worst happens. 

There is no point asking the tax authorities. 1. they won't answer. 2. you will have flagged it up.

[saveasteading]

On further thought, I think your company would be high on the list for inspection. *

The absence of any other projects would be of interest.

Their assessment of your benefit in kind would then be taxed as a dividend. 

That is assuming they considered you not to be evading tax.

 

* friendly tax inspectors have explained that there are many markers that instigate a visit.

New with substantial turnover is one. 

Closing down again is another.

They then come and sit with you for a day or so, going through every single paper, with the occasional query. Nerve-wracking even when there is nothing wrong.

[Drellingore]

2 hours ago, saveasteading said:

vat reclaim on plant and fees, which otherwise the VAT man would have

 

I'm not sure I follow you. What is the difference between my SPV doing design-and-build and reclaiming VAT on a quarterly basis, and someone like Potton doing design-and-build and reclaiming VAT on a quarterly basis? What VAT is HMRC missing out on - especially given that as a self-build scheme it will all be reclaimed by the end client anyway?

 

1 hour ago, saveasteading said:

The absence of any other projects would be of interest.

 

The whole point of a special purpose vehicle is to isolate financial risk by being for one specific project. I would have thought it's a concept HMRC are familiar with.

 

1 hour ago, saveasteading said:

your benefit in kind would then be taxed as a dividend

 

What benefit in kind is that?

 

1 hour ago, saveasteading said:

considered you not to be evading tax

 

Which tax is being evaded? VAT is being paid, corporation tax is being paid (which it otherwise wouldn't be, so if anything HMRC get more via this approach), capital gains tax is being paid.

 

2 hours ago, saveasteading said:

mostly avoiding tax

 

Can you quote any of my posts where I said the benefits were mostly avoiding tax? The benefits are mostly avoiding cash-flow pinches and expensive bridging finance. One of the reasons that I'm quite fine with posting things publicly is because it's all legitimate.

[andyscotland]

4 hours ago, Drellingore said:

I'm not sure I follow you. What is the difference between my SPV doing design-and-build and reclaiming VAT on a quarterly basis, and someone like Potton doing design-and-build and reclaiming VAT on a quarterly basis? What VAT is HMRC missing out on - especially given that as a self-build scheme it will all be reclaimed by the end client anyway?

 

There are a few exceptions to the self-build scheme, including as @saveasteading said things like plant hire (unless it comes with an operator) and professional fees (architect, engineer etc) which you cannot reclaim on the self-build scheme, but your SPV could reclaim as input tax in the course of "business". So arguably you would be a bit up on where you'd be as an individual.

 

4 hours ago, Drellingore said:

The whole point of a special purpose vehicle is to isolate financial risk by being for one specific project. I would have thought it's a concept HMRC are familiar with.

 

But it doesn't sound like your SPV is to isolate financial risk, from what you've said it seems it's primarily about being able to funnel money from another company rather than borrowing from the bank? A normal SPV would be e.g. to allow you to borrow from the bank / investors with limited liability if the project went downhill. But in your case if the build goes over budget you'll just have to find more money somewhere and pay it into the company?

 

4 hours ago, Drellingore said:

What benefit in kind is that?

Which tax is being evaded? VAT is being paid, corporation tax is being paid (which it otherwise wouldn't be, so if anything HMRC get more via this approach), capital gains tax is being paid.

Can you quote any of my posts where I said the benefits were mostly avoiding tax? The benefits are mostly avoiding cash-flow pinches and expensive bridging finance. One of the reasons that I'm quite fine with posting things publicly is because it's all legitimate.

 

So you have said that the main benefit is to be able to take the cash from your holding company instead of getting bridging finance. But you haven't said why you have to have this convoluted setup to do that, rather than just having your holding company lend you the cash direct.

 

My assumption (and I suspect @saveasteading has also read between the lines the same way) is that you are a participator or Director in the holding company, and potentially it's a close company, and therefore taking a personal loan from the company would trigger a substantial tax charge. And so you/your accountant have come up with this structure to have the company invest in an SPV so that you are "not actually borrowing yourself".

 

This is getting beyond my detailed knowledge, but if that's the case then I think you have a potentially major problem if HMRC decide to "look through" your chain of transactions, particularly if the SPV is also a close company under your control. Factors that may be of interest to them would be:

• Why has the holding company decided to lend money to the SPV? Is that a genuine investment in a trade? The fact that there is no plan for the SPV to ever design & build more than one building would suggest not. So perhaps the loan is only being advanced because the two companies are under your control and it would suit you to have the money temporarily leave your holding company without taking it as a distribution. CTM61570 - Close companies: arrangements conferring benefits on participators may be relevant here, as it covers situations where participators are "extracting value out of their companies in untaxed forms which did not ... amount to loans ... within the meaning of [the rules for loans to participators]".
• Why has the SPV decided to extend you such generous payment terms (full balance due on the completion of the building)? That would not be normal for a design and build contract on a commercial basis - a normal contractor would expect stage payments as work progressed (probably including some amounts ahead of construction). If a company is incurring direct expenditure on a client's behalf but offering the client extensive time to pay that in itself can be a form of loan depending on the circumstances. If the company is close and the client is a participator then again that could meet the definition of a loan to a participator or the Targeted Anti-Avoidance Rule around "value extraction" above.

If I was a tax inspector in a bad mood who thought you were trying to be too clever, I might even try to argue that there should be a tax charge on the value extraction from the holding company and another on the value extraction from the SPV - it might be the same money, but there are two separate legal entities each making non-commercial decisions that benefit you.

 

As earlier in the thread, if your accountant has advised this strategy and knows what they're doing, all well and good. Just bear in mind there are plenty of accountants who've ended up on the HMRC "too clever for their own good" list - often for schemes involving extracting value with loan-like structures. And plenty of their clients who have ended up with hefty penalties as a result of following their accountant's advice. Probably at least worth making sure they have good professional indemnity insurance and you have their advice in writing...

 

13 hours ago, Drellingore said:

My current understanding, having spent yesterday reading VAT Notice 708, but not the HMRC VAT Construction Manual.

 

From what I can see it looks like you've now got the VAT stuff correct.

 

13 hours ago, Drellingore said:

• We can leverage funds in the holding company, meaning that we don't need expensive bridging finance. I last did the maths when corporation tax was 19%, and the overall cost of finance over a year was about 0.37% once inter-company interest has been charged, profits have been made, corporation tax paid, business asset disposal relief has been claimed, and capital gains tax paid. On a bridging loan at 0.5%pm, that would work out at 6.1% over a year.

 

I'm also curious why you're comparing your model to bridging finance (which I agree would be pricey) rather than a normal self-build mortgage? They are usually a bit more expensive than other mortgages but would be a lot cheaper than a bridging loan. And because you draw down the mortgage as each stage of work is complete, you are borrowing some of the money for much less time (particularly if you then remortgage to a standard mortgage on completion) so you are not paying interest on the whole build budget from the day you start.

 

Also in your list of costings there you don't mention:

• Dividend / income tax on the final distribution of profit when you wind up the SPV, or on the interest income in the Holding Company. Depending on your income tax rates and how much profit / interest you're charging yourself, those could also be reasonable-sized numbers.
• Professional services - accountancy and filing fees for the SPV, advice on the loan agreement between HoldCo and SPV?
• Insurance - you may well find that liability & build insurance for a LtdCo with no track record is more expensive than if you were to get a self-build policy as an individual.

 

13 hours ago, Drellingore said:

• Cash flow will be better, as the SPV can reclaim VAT every quarter, instead of waiting until the build is complete.

True, though if you end up getting zero-rating and are primarily hiring labour & materials contractors to do the work that may prove a marginal benefit.

 

13 hours ago, Drellingore said:

• The number of invoices that need to be processed through the self-build reclaim scheme will be drastically lower.

Not sure there's much of a saving there, typing them onto the self-build reclaim list isn't that much more time consuming than typing them onto whatever electronic system your SPV would use for its VAT returns.

 

13 hours ago, Drellingore said:

• We can use all the business accounting software and processes we're used to, and have all the finance stuff firewalled off.

Surely you can use whatever software & processes you like regardless of whether the funds are sitting inside your SPV or in your bank account?

[Drellingore]

Thanks for a more thoughtful and detailed critique @andyscotland, I genuinely appreciate the effort involved. It's much nicer than the alternative.

 

As well as some good points (insurance, and the totally valid question of 'why not get a regular self-build mortgage') there are a few assumptions, I expect in part because quite understandably you don't have complete information on my businesses and their structures, and my collaborators. There are also criticisms that I've already addressed, and seemingly have been missed. The benefit to me of pointing them out is limited, with a guaranteed downside that this discussion gets drawn out even further, inviting more opportunities for people to take the worst possible interpretation of a general approach. I've been sat at my keyboard for far too long this Saturday morning trying to formulate the most polite explanation I can for why I think this discussion could become interminable and largely fruitless.

 

Thanks for calling me out on the VAT stuff, I think I now understand the logic of that much more thoroughly.

I also reckon I'll stick to battery-powered tools to avoid the 110v/240v issue for as long as possible 

[andyscotland]

@Drellingore fair enough. You will always have more knowledge of your situation than anyone here, and those facts may of course make yours a valid approach in your specific circumstances.

 

Most of the criticisms stem from the fundamental question of why you can't save all the hassle and have HoldCo lend the money to you personally. I did look back over the thread before I posted last night and I'm pretty sure you haven't addressed that.

 

No requirement for you to do so, but given that seems an edge case - it would be unusual for a lender to be unhappy to lend to an individual but happy to lend to an individual's LtdCo given the much higher risk of default when lending to a company with no assets - it is not surprising that people have made assumptions as to what might be going on. Particularly also because as you've acknowledged there are tax & overhead costs to going your route that wouldn't exist on a direct loan, so prompting the question of what costs/risks/problems you are avoiding to make that worthwhile.

 

And of course even if your intent & situation is entirely above board, HMRC may still turn up one day and ask the two questions I asked last night. So there's no need to answer them here, but I'd make sure you have a solid answer to each - ideally documented as part of the original decision making so that the intent of each company is clearly evidenced.

 

But as I said some posts ago, not my circus, not my monkeys.

 

One last comment is that you'll often find on BuildHub that we reply both for the benefit of the poster and also for future readers.

 

If you feel people have taken unfair assumptions, it may just be because those are natural assumptions to make purely because of what's been written (and not written) in a thread. And we want to protect a future reader from making the same assumption and thinking "oh that's a great idea, I could do that" without the detail of your specific situation and without thinking through the ways an idea could go wrong.

 

So please don't take anything as a personal criticism, or a pressure to share more justification, I am quite happy to accept you & your accountant with all the facts in front of you may have a plan that works. I just think it's unlikely it would work for many people, and should be approached with extreme caution.

[andyscotland]

Oh, and good call on the 110/240 question, heaven help any future reader that arrives here looking for that one! 🤣

[Drellingore]

One thing I discovered this week is that tool hire companies only seem to lend our 110v kit - so if you're thinking of hiring any gear (which won't be VAT-reclaimable!), having a 110v transformer might be handy. Unless you're going to hire one of those too, which is exactly what I did today.

[saveasteading]

Yes, tool hire companies are mostly hiring heavy duty stuff to the industry. 110V is the norm.

I would always buy a transformer and cabling, as it is about 6 weeks hire cost. When it gets damaged of stolen, you'd be amazed what hire companies say it costs to replace.