Self Build & commercial build combined

[Pots]

Hello 

 

My first time on the forum, so bear with me. 

 

We have planning permission pending for 2 houses to be built to the side of our current home. We own the plot as individuals but we are also a Ltd company (builders) and want to move into one as a self build (built by our company) and sell the other. 

I know I can reclaim the VAT on any items we buy (if reclaimable) at the end of the project for the self build and I will be making VAT returns for the other property via the company. It will be a massive headache splitting out the costs so any ideas on that would be appreciated! 

 

I'm also trying to work out how to make the idea work out most efficiently in terms of tax. I will be hammered for CG when we sell the new build, I'm wondering whether I can do something clever with the ltd company to help alleviate the hit.

 

Has anyone done anything similar, that I can fire some questions at?  I'd be so grateful, my brain is mush every time I try to work it out!

[MikeSharp01]

Welcome and what a lovely situation to be in. I only know what I have picked up in along the paths of life but you could perhaps look at putting the 2nd property into your company pension fund, assuming you have a self administered fund, this might be tax efficient but won't allow you to realise instant profits for the staff. If its a true part of the business you will be liable for corporation tax on the profit not capital gains (a tax for individuals) unless you are keeping the property privately - in which case you will need to ensure traceable payments are very carefully made by private individuals and on the VAT reclaim side you will need to declare your relationship to a VAT registered company when you make your return to claim back the VAT on the first house IIRC. There is is also a possibility of setting aspects of the build off against tax if you handle parts of it as R&D (EG Developing innovative energy systems), training and development of the staff (EG air tightness skills perhaps - wholly and exclusively naturally..) and possibly apprenticeship(s) unless you are big enough to be paying your CiTB contribution already!  Given all the options your accountant would perhaps be best to provide insights.

[Ferdinand]

You do not say roughly where you are - county?

 

You should probably have taken advice before getting PP, but taking advice from a property-knowledgeable accountant would be wise now. 

 

There are many things that the system seeks to encourage you to do, which could involve pensions (or back contributions) or keeping money in the company, or potentially use your Entrepreneur's Allowance. I think holding actual property in a pension fund can be complex involving much buggeration ... not allowed in a SiP, for example.

 

Potentially 2 of you can take the max annual employer pension contribution of is it 40k x several years of current and back payments minus your existing contributions into say a SiP. That could be significant before you even start. then depending on age you could draw down as allowed and park the rest somewhere conservative for your pension. Plus the value of what you put in can come out again.

 

It is also worth considering a separate Ltd for the company built house to walk away clean.That may help with your isolating payments etc.

 

The cardinal rule is talk to somebody who knows where the regulatory kaleidoscope has stopped for now, KISS, and follow the rules. Being too clever is not worth the candle afaik, because the admin overheads will be ££££££, and you are builders not bankers.

 

Obviously, this is just personal opinion not advice and I am a layman who is not up to date.

 

F

 

Edited August 4, 2017 by Ferdinand

[Pete]

Is the land that has the Planning permission on part of your garden? We are in the same position in that we are building one for ourselves and one building plot for sale. If we built on the building plot and sold the house we would have been liable for CGT but we decided to just sell the plot as the value of the plot is the same as may be the profit we would make without all the work of building. The reason I ask is it part of your garden as you are not liable to pay CGT if you sell part of your garden while you live in the main residence. We will need to sell the building plot before we move into our new build otherwise we would be liable for CGT.

[Pots]

Thanks everyone, you've given me food for thought. We are only a small company and don't earn much as directors, only 2 employees. 

The only advice we had from our accountant was to do one after the other and leave it a few years, but to be honest I'm done moving every couple of years, so it's not ideal and I believe will be quite risky to argue with HMRC. 

I'm very inexperienced with pensions, so I'll be doing lots of reading up on those options. I am more interested in the ltd company option, but again, more research is needed.

Yes, Pete, the land is the garden of our current property, although confusingly isn't in the same title! Not sure if that will be problematic. 

Oh and we are in SE London. The land with PP would fly off the shelf but it's not really want to do.

Anyone know of any accountants or specialist financial advisors in this field? I can badger them too!!

 

 

Edited August 23, 2017 by Pots
missed a line

[Temp]

Pots: Beware there is a VAT trap if you build and end up renting out the "extra" house instead of selling it. You might have to repay all the VAT reclaimed through the company.

 

https://www.accountingweb.co.uk/any-answers/vat-revovery-on-rented-new-builds

 

Well worth seeking advice from an accountant.

 

[Pots]

Thanks Temp, we were advised about that - so definitely not part of the plan, we'd like to sell it but with the least painful tax implications!