- This topic has 29 replies, 15 voices, and was last updated 13 years ago by molgrips.
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Accounting question
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molgripsFree Member
I'm self employed (IT contractor, Ltd Co.) and I've been staying away in hotels for the last year or so, which may well continue. Most work is in the South East, but I live in Cardiff and I don't really want to move down here.
I just noticed that there are some 1 bed flats going up around the corner here, and it got me wondering about the possibility of buying one. I'd have just bought one privately, but a colleage started going on about all sorts of different options of having the company buy it, or making it part of a pension fund and such. So what are the options?
However, I claim for my hotels from my client, and I can't see how I'd be able to do this if I had my own flat. Another possibility is setting up another company in say my Wife's name and having her buy the flat, and then paying her for the rent. This seems pretty dodgy, but is it?
molgripsFree MemberThanks for that gem.
For the record I do realise that there are specially trained people in the world who are skilled in this but for various reasons I'm not speaking to them, I am speaking to STW.
Should we just replace STW forum with a static page?
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Camper van dealerFresh Goods Friday 696: The Middling Edition
Latest Singletrack VideosFresh Goods Friday 696: The Middlin...soobaliasFree Memberfor various reasons you are not speaking to your accountant, or you are not speaking to anyone who is skilled in this area
you had set alarm bells ringing with the OP, now im concerned enough to keep my nose out
tronFree MemberI would suspect that you are close to the mark – you would need a separate LTD owned by yourself owning the property, with it charging you for its use. You'd then be able to claim it as an expense. But I'm not an accountant!
TheFlyingOxFull MemberAnother possibility is setting up another company in say my Wife's name and having her buy the flat, and then paying her for the rent. This seems pretty dodgy, but is it?
How would this be dodgy? You're either paying rent to live in a flat owned by company A or company B. That's how HMRC would look at it.
tronFree MemberHow would this be dodgy?
I think from a tax perspective it would be fine, but from the clients point of view it could look odd. An alternative would be rolling the cost of accommodation into the day rate and owning the place yourself, but I believe expenses have different tax rules, so it could make you uncompetitive.
molgripsFree Memberyou had set alarm bells ringing with the OP
What, alarm that someone's thinking aloud about vague ideas on a chat forum? Oh my goodness! Jeez. I'm not depending on STW for hardcore advice that is going to be acted upon. I'm just asking for general chat on the area to help further research 🙄
You're either paying rent to live in a flat owned by company A or company B. That's how HMRC would look at it.
That's my thinking – after all my wife can set up any business she likes, right? But I seem to recall that HMRC can call you up for taking the piss, even if it's legal.. but having said that this isn't tax avoidance, it's expenses fraud, so my client should be the ones to worry not HMRC 🙂
FunkyDuncFree MemberI'm an accountant and recommend you speak to your accountant 🙂
soobaliasFree Memberno its ok funkydunc, he says this advice is not going to be acted upon, so feel free to dish out advice on a barely understood situation – it will be fine.
OP, you should get a lovely mix of advice from mtbrs, wishing you all the best.
molgripsFree MemberMy accountant is a bloke in a firm who only wants to file the odd form and a do a return. If you ask him anything complicated he either doesn't know or puts me on to some greasy salesman type that annoys me.
I could get another, but that's a whole new ball game. I'm about a million miles away from actually being able to do anything like this, so any accountant will tell me to stfu and come back when I have a pile of cash waiting to have something done with it.
I just wanted to know what's possible before I start the long process of working towards it. In my experience professionals consider this timewasting and make me feel like a dick for even asking.
molgripsFree Memberso feel free to dish out advice
I didn't ask for advice. I asked for information…
tronFree MemberMolgrips, you seem to be a little confused about what accountants can and can't do.
Pretty much every profession out there fairly heavily regulated – accountants, lawyers, architects etc. This makes it extremely unwise to give any advice or statement without the full information, even unpaid or "off the record", as it can come back and bite you in the arse.
As a result, at best, anyone asking questions of this sort of nature is going to get advice from laymen. Ask about IR35 and you'll get a few other contractors piping up. You'll very rarely see anyone with ACA or ACCA on their business card posting.
If I were you, I'd look for another accountant who has the time to give you proper advice. He's right to palm you off if he hasn't got the time to do the job properly, but it's not a good situation for you. As for accountants having bad attitudes, you're paying them! Most professionals understand that, and will explain everything in one syllable words if that's what the client wants.
geoffjFull MemberThere is no reason why you couldn't set up another company in your or your wife's name which then buys the flat and charges you rent.
A property SIPP could be the answer from a pension perspective.
http://www.propertyinvestment.co.uk/investments/property-sipp-propertySpongebobFree MemberJeez, you need advice from someone who knows the tax system – a good accountant!?
If you don't trust one accountant, see another to compare what they tell you.
My accountant is great and doesn't rip me off. He knows what he exists for – to save me money legitimately.
Some people!!
molgripsFree MemberI fully understand that professionals don't want to dish out advice for free, and that there are liability issues. Advice or information from laymen is fine and just what I was expecting! I think you misunderstand – not asking for tax planning, just a few people's experiences or some general info. By all means don't post if you are a professional, but don't give me grief!
And I certainly don't wanna pay christ knows how much per hour for a bit of general chat on a subject that won't even see action for a few years.
meftyFree MemberThis is not an area I specialise in but my view is that if you rent (whether from a related party or not) you would risk losing a deduction for your accommodation costs. At present you are presumably maintaining that the centre of your business is your home in cardiff and therefore claim the costs of living away from there and the costs of getting to your site of daily work. As soon as you start to rent, it implies a greater degree of permanence and it could be argued that your centre of business is now the flat and your home during the working week and therefore not tax deductible.
brFree Membermolgrips
I'd ask your Financial Advisor, or if you don't have one I can recommend a chap we use (High Wycombe so maybe ok for you) – EIP
The way I understand it is that you could use your pension fund to buy the asset (flat) and then rent it back to your Ltd company. You then pay to stay there, on expenses. Forget the detail though.
greenboyFree MemberIT's amazing, if you want advice on anything you can always rely on the STW crew to give it willingly and free. However whenever you want an accountant or solicitor out comes the hand and asks for money! I bet they ask for and get FREE (yes FREE) advice from all of us here and use it to good effect so why not give a bit back you guys and stop holding you hand out for an hourly rate!
Be part of it or leave!
JakesterFree Membergreenboy – Member
IT's amazing, if you want advice on anything you can always rely on the STW crew to give it willingly and free. However whenever you want an accountant or solicitor out comes the hand and asks for money! I bet they ask for and get FREE (yes FREE) advice from all of us here and use it to good effect so why not give a bit back you guys and stop holding you hand out for an hourly rate!Be part of it or leave!
That's a troll, right?
tronFree MemberBe part of it or leave!
I've explained above why it's not sensible for any professional to give advice on here. There's no Association of Chartered Shed Bike Fettlers that's going to come down on us an affect our ability to make a living if we tell someone to do their comes up too tight.
molgripsFree MemberI do have a good financial adviser, and I'll probably talk to him later – but I dunno how much he knows about the corporate side of things.
I will also talk to my business bank manager about mortages etc.. and then I'll save up 30 grand 🙂 Seems like I have a few options.
Mefty – interesting point. I was thinking of having Mrs Grips set up a corporate letting business renting daily/weekly, and then just having me as a client any time I happened to be working nearby.. but good point.
tronFree Memberthen I'll save up 30 grand
It could work better if you can get a debenture on the property, given the way interest rates are, and property prices tend to go… Unless you need 30K as a deposit on a one bed place down there 🙄
molgripsFree MemberHmm, the only kind of debenture I know about was at Cardiff Arms Park…
EDIT: I did spend some time coding debentures at Companies House – not long enough it seems!
I thought £30k would be a required deposit… I assume this is still required for businesses?
vinnyehFull MemberMolgrips, I looked into this two or three years ago when on a contract up north.
I can't remember everything, but it wasn't considered wise, either by the accountant (yours may be different), or by the contractor forums- if you search in the usual places, the question gets asked a lot.
iirc, iff you buy the property through your own company, you'll have difficulty liquidating your company regularly if you do that, you'll pay cgt on disposal, then personal tax when you extract profits, and if you live in it it's a bik, and there might be issues with claiming travel etc.
If you set up a separate company just to purchase a flat, and need to take out a mortgage, I think you'll find the banks won't exactly be banging on your door looking for the business especially in this climate, there's going to be a fair degree of risk attached to their loan.bazzerFree MemberMolgrips
With reguard to your client not wanting to pay your rent, you could negotiate a new rate with them instead of the expenses claim. Thats the good thing about working for yourself, you can be flexible in these matters.
Be aware though if your company has assets in the unlikely event you are sued (if you dont have the right insurance) they could be seized.
Bazzer
Surf-MatFree MemberAn accountant charges you for speaking to him/her. We don't! Also an accountant has a major "client" – The IR. If he pi55es them off he has no job. So really while working for clients such as yourself, he will always be very cautious.
I've found it good to speak to successful people who have found out their own ways of saving money. But do be careful especially with property – a director of an old company I worked for has had a long battle with the Revenue after sailing a bit close to the wind and getting investigated.
vinnyehFull MemberRead through all your posts now. Get a new accountant, one that specialises in people like you. Ours produces shedloads of guff advising what can, can't, should and shouldn't be done. But his whole business is IT contractors.
missingfrontallobeFree MemberCan't you just buy the flat, declare it an office, then live there, citing too many miles between office & home to commute?
molgripsFree Memberand if you live in it it's a bik, and there might be issues with claiming travel
Hmm.. but I'd only stay in it in the week – much as I do in a hotel now. And if it weren't rented to me it'd be rented to someone else.
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