Running a landlord company

[Pottersfarm]

We have recently split off some commercial assets into a ltd company. It’s a landlord company effectively. The company has very little costs though. I’m looking at putting some costs through it but the accountant isn’t forthcoming with advice so I’m going to be changing accountants. Meanwhile if anybody has a business that solely lets out commercial buildings what kind of costs have you got in the company? I’m thinking about an electric car as one cost. Possibly a telehandler. All units have their own elec supplies so we are not reviling for that. Building repairs are minimal so other than professional fees (accountant, solicitor etc) we have very few costs within it. I’m running a farm partnership along side it and wondering if I can run some farm costs through the landlord company to reduce the partnerships tax position which exceed 40% presently although looking at current crops harvest 24 could see that drop a lot anyway.

 

[Lawless]

Interesting. What are/were the reasons to splitting commercial into a Ltd company if you don’t mind me asking? Also at what rental income threshold would you decide it would be beneficial to create a commercial company?
I thought the government had made it not so attractive for landlords to do this.
Are you actively collecting the rent yourself and ‘managing’ the properties or is it just an investment vehicle?

 

[wanton dwarf]

Why would anyone post information that could be used against them by HMRC ?

Suggest you think about what you've posted as it seems somewhat naive - especially the idea costs are low - all buildings need to be EPC grade C within a few years which means LED lighting & insulated walls & roofs.

Everything wears including driveways, water meters, septic tanks etc.

Good for the electric companies that they can charge every tenant - not much good for you though.

 

[B R C]

If you have a separate farming business as well then you need to keep everything separate, but you can then invoice the farm for work done, telehandler hire etc. You just can’t buy a telehendler for the landlord business and use it on the farm with no cost to the farm. They have to be separate businesses and transactions between totally transparent.

 

[Goweresque]

I always love it when someone comes on here and basically asks how to commit tax fraud

I think you should be listening to your current accountant, he or she is obviously giving you good (and legally correct) advice. Going to some shyster who is happy for you to put down whatever farm expenses you like on the rental business won't do you any good when HMRC come calling. You sign the tax return, not the accountant, and its you that will have to pay the tax due (plus penalties) should they decide to inspect you, or your company.

 

[neilo]

If you have a separate farming business as well then you need to keep everything separate, but you can then invoice the farm for work done, telehandler hire etc. You just can’t buy a telehendler for the landlord business and use it on the farm with no cost to the farm. They have to be separate businesses and transactions between totally transparent.

I guess the letting business could buy a telehandler and lease it to the farm business though?
I suspect it would have to be at close to the market rate to satisfy any HMRC investigation though.

 

[Nearly]

I always love it when someone comes on here and basically asks how to commit tax fraud

I think you should be listening to your current accountant, he or she is obviously giving you good (and legally correct) advice. Going to some shyster who is happy for you to put down whatever farm expenses you like on the rental business won't do you any good when HMRC come calling. You sign the tax return, not the accountant, and its you that will have to pay the tax due (plus penalties) should they decide to inspect you, or your company.

never misss an opportunity to post this.

 

[Pottersfarm]

Interesting. What are/were the reasons to splitting commercial into a Ltd company if you don’t mind me asking? Also at what rental income threshold would you decide it would be beneficial to create a commercial company?
I thought the government had made it not so attractive for landlords to do this.
Are you actively collecting the rent yourself and ‘managing’ the properties or is it just an investment vehicle?

We had a business review basically and splitting things up was the way to reduce overall tax as well as sorting inheritance stuff at the same time. We are commercial property not domestic so rules are different. Yes we collect rent ourselves via DD and hold a 5 month deposit which is paid upfront. This is returned if the tenant leaves and there’s no issues. We fully manage them so any issues and we sort it out.

 

[Grass And Grain]

We have recently split off some commercial assets into a ltd company. It’s a landlord company effectively. The company has very little costs though. I’m looking at putting some costs through it but the accountant isn’t forthcoming with advice so I’m going to be changing accountants. Meanwhile if anybody has a business that solely lets out commercial buildings what kind of costs have you got in the company? I’m thinking about an electric car as one cost. Possibly a telehandler. All units have their own elec supplies so we are not reviling for that. Building repairs are minimal so other than professional fees (accountant, solicitor etc) we have very few costs within it. I’m running a farm partnership along side it and wondering if I can run some farm costs through the landlord company to reduce the partnerships tax position which exceed 40% presently although looking at current crops harvest 24 could see that drop a lot anyway.

If you were to run some farm costs into the landlord company, wouldn't that increase your partnership profits taxed at 40%? Or do you mean doing it the other way round. i.e. landlord company buys the farm machinery and charges farm a big contracting charge, this reducing farm profits?

 

[Pottersfarm]

Why would anyone post information that could be used against them by HMRC ?

Suggest you think about what you've posted as it seems somewhat naive - especially the idea costs are low - all buildings need to be EPC grade C within a few years which means LED lighting & insulated walls & roofs.

Everything wears including driveways, water meters, septic tanks etc.

Good for the electric companies that they can charge every tenant - not much good for you though.

It’s a genuine question. I’m not referring to anything dodgy. Water use and septic tank is minimal as it’s basic commercial storage with very few people on site working as such. Driveway use is a cost already allocated and we’ve had a company in and done a month long investigation so now have some accurate figures.

 

[Grass And Grain]

never misss an opportunity to post this.

It's not unusual for farmers to have machinery owned by one business and charge contracting rate to the farm business. Common when neighbours purchase machinery together and charge contracting fee to the two separate farms?

 

[Pottersfarm]

If you were to run some farm costs into the landlord company, wouldn't that increase your partnership profits taxed at 40%? Or do you mean doing it the other way round. i.e. landlord company buys the farm machinery and charges farm a big contracting charge, this reducing farm profits?

I’m looking to put costs into the ltd company so for example we have 2 commercial vehicles and 1 car. There’s 3 partners and 3 directors. I can’t see why we can’t run a car through the ltd company for example?

I’m not thinking of buying a combine and putting it through it. It’s legitimate stuff for example the telehandler spends a lot of time within the landlord business.

 

[Grass And Grain]

I’m looking to put costs into the ltd company so for example we have 2 commercial vehicles and 1 car. There’s 3 partners and 3 directors. I can’t see why we can’t run a car through the ltd company for example?

I’m not thinking of buying a combine and putting it through it. It’s legitimate stuff for example the telehandler spends a lot of time within the landlord business.

So if you take the commercial vehicle costs out of your farm accounts, this will reduce your farm costs, and thus increase your farm profits?

 

[Nearly]

It's not unusual for farmers to have machinery owned by one business and charge contracting rate to the farm business. Common when neighbours purchase machinery together and charge contracting fee to the two separate farms?

We've a few businesses and own things between them and seperately. It all has to be defendable and transparent.

A car through ltd co is an expensive way of doing it, as it's a benefit in kind and taxed on the new value of the car no matter how old it is. (whan last we looked into it)
A crew cab pickup pool car is possible. Personal use may be restricted.

If you've split the business on advice and are still looking for more advice then the accountant etc hasn't provided you with the full plan.
We're putting the running of the farm into LTD co at the next change while all the fixed assets remain in partnership ownership.

 

[Grass And Grain]

We're putting the running of the farm into LTD co at the next change while all the fixed assets remain in partnership ownership.

We are thinking of putting our diversification into a LTD, although that's mainly to protect the farm from any big claims.

 

[Nearly]

Holiday cottage operation will be in the ltd with the farm trading. Livestock and machinery owned by ltd but crops grown by the partenership. No one ever got trampled by a spring bean on the footpath.

 

[wanton dwarf]

It’s a genuine question. I’m not referring to anything dodgy. Water use and septic tank is minimal as it’s basic commercial storage with very few people on site working as such. Driveway use is a cost already allocated and we’ve had a company in and done a month long investigation so now have some accurate figures.

TBH it's the way you are saying "Telehandler" without justification.

You are running a business, that business provides a service which is on a property - yet you don't seem to understand what the business is. Without the property - the farm - the rentals business wouldn't exist. Hence what is the farm providing OR what service could/does the farm provide for the rentals which should/can be paid for by the rentals.

Example:
The AA could be a company which provides over the telephone support for drivers who's car has failed - in such circumstances the AA could claim for telephones & an office but would be unable to claim for vans, trailers & recovery vehicles.

Hence "What is the business you are providing" - you say you've got a "Company in" to do something with the driveway (which might actually harm justification). The important point is how is the farm/rentals business going to maintain the driveway ? How is snow going to be cleared & debris brushed ? How is the garden, fences, hedges, paths, parking, lighting going to be maintained ? Where are the tools, machinery & labour coming from ? Is the farm a charity or a business ? Same to be said of the rentals. This is not a question of Taxes or indeed avoidance - this is a question of the reality of what the business is. If you have created a low cost business then obviously there is nothing else you can claim for. QED.

It's really straight forward BUT you CANNOT just lump in a machine just because you want to - you have to provide a service, which you don't necessarily have to itemise for.

TBH I think you've approached the whole business from the wrong perspective which shows from the start saying the costs are low - they will be if the farm is providing all the machinery & labour - the rentals is not separate from the farm, farm machinery, tools & the workers on the farm - you are heading into a position where you'll have to invoice between companies to justify reality which will be very messy & time consuming.

 

[PSQ]

I always love it when someone comes on here and basically asks how to commit tax fraud

Talking about the boundaries and committing fraud are two different things.

Legitimate discussion hasn’t been criminalised yet, well not unless you’re discussing whether someone is a chick with a dick or a guy with tits.

 

[Goweresque]

Talking about the boundaries and committing fraud are two different things.

Legitimate discussion hasn’t been criminalised yet, well not unless you’re discussing whether someone is a chick with a dick or a guy with tits.

I don't think asking how to put farm expenses through a completely separate commercial rental business counts as 'talking about the boundaries'. Asking how much of the cost of re-surfacing the drive can be allocated to the rental business, or allocating part of a farm employees labour cost because they do lots of odd jobs for the rental is discussing the boundaries. Wanting to buy a telehandler (to be used predominantly on the farm) is so far over the line one is struggling to see it with binoculars.

Personally I can't see how allocating farm expenses to the rental company helps anyway. It reduces the rental co profits, which are taxed at either 25% or 19% (if under 50k) and increases the farming partnership profits which are apparently taxed at a marginal rate of 40%. This seems to be a very odd tax reduction scheme.

Basically there's only a certain amount of expenses to go around and shifting them from farm to rental isn't going to make much difference in the long run, apart from being illegal if the expenses are not legitimate ones incurred by the rental business.

 

[Bongodog]

You say you had a business review, but then go on to say that your accountant isn't forthcoming on advice, the big question is who did the business review, I would expect the accountant to be a big part of it as you have created a limited company. I don't know about other peoples accountants but I know mine wouldn't file a tax return with a big expenditure on an unwarranted item. If you have to travel regularly to the commercial site a car would be justified, if however its next door to your home its not.