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  • Holiday Lets

    Buying through limited company

    I am looking at buying a holiday let and am considering buying through a limited company for tax and inheritance reasons. However I am having trouble finding out what the potential pros and cons might be as I don't think they are the same as for normal buy to lets. There are things that I could do if I owned the holiday property in my own name that I am not sure how would work if it was owned through a company; such as using it myself during off-season periods, or living in it with my family after retirement.

    I'd be interested in hearing other people's experiences and advice.

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    Hi Alison,

    Holiday lets are not affected by Section 24, so I am not sure a limited company would be the best option.

    Buy it in your own name using a holiday let mortgage.  If you stay there yourself a couple of times a year, it won't be a problem, because you can be checking the condition of the property and undertaking an annual face-lift.

    If you moved into it permanently, you would have to get permission of your lender and it's likely they would decline, meaning you would have to get a residential mortgage, which could be tricky if you were retired.

    So if you plan to live there one day, it would make sense to get a repayment mortgage or have a plan whereby you can unencumber the property prior to moving to it permanently.

    There is a wealth of information in the below resources:

    Guide to coastal property for investment

    Guide to sourcing & setting up a holiday let

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    Thanks Vanessa. Your advice on staying in the property in insightful and helpful. 

    It's not the mortgage I am worried about as it won't be a big one and could be paid off before I retire if necessary.  

    The bits I am struggling to understand are the implications of it being owned by  my holiday let limited company. 

    Assuming there was no mortgage, what would happen if I were to move into it? Would I have to "buy" it off my company and pay stamp duty and capital gains tax? Is it a benefit in kind that would have to appear on the company's books? Would I have to pay my company a market rent? Would I have to stay in it for a maximum or minimum number of consecutive weeks?. Is there a government body that would care anyway?

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    I'm not sure buying in my own name is the best option as I will have to pay 40% tax on the income.

    Also I'd like the option of sharing ownership of the holiday let with my husband and children and this seems to be the easiest way to do that without impacting their ability to buy their own houses in the future.

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    Hi Alison - Vanessa is correct on S24, still I would consider using a Limited.

    Downside of Limited, given the use you describe, is if you decide to move in once retired you me be subject to that -->

    https://www.gov.uk/guidance/annual-tax-o...f-dwelling

    As everything there are positive and negative aspect to consider.

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    Many thanks. The property isn't worth enough to fall into those bands fortunately.

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    I have ran Holiday Homes from 1992 to 1998

    And I found it hard work ? very different from BTL

    Holiday home owners run a business and its time consuming You need to be really on the ball I found If you turned out a Holiday Home below Parr you would get issues with your customers

    I set mine up on what I thought was a good standard  and I have a number of complaints at the time I was living 20 miles away from the holiday homes

    The following year I went back to my business strategy and I upgraded the Holiday Homes and I went to live in an annex next to the holiday homes

    The costs were high - Four Poster Beds High Spec kitchens and High sec Bathrooms

    Your Busy time is hand over mine was on a Saturday and I used a cleaning company. It was all hands on deck to turn the place around for the nect guests

    the second season and following seasons went very well I had the highest rating from the Tourist Board and t was much better living on site to deal with questions and building a relationship with the customers

    It was a lot of fun but I found when I compared how much profit I was making it was a lot of effort for the same gain I could make on a normal BTL

    You are payng for every thing Council Tax, Electric, Gas ect ect and you normally have voids I worked on 65% occupancy and I found 75% ish was achieved  it was busy peak periods July to Sept Christmas and New Year and Easter but I had quiet spells in-between

    I think If I wanted to live in the country and run a business I would have stayed but I wanted more freedom which BTL gave me and taking the cash from the property in the country allowed me to build a big business away from the Holiday home Business which I have no regrets

    I think my view is do you want to be an investor or a self employed person

    I am a true investor and will stay this way I am not a worker ?????

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Thanks DL. Your comments are food for thought as always.

    The property is already a successful holiday let and being sold with forward bookings which reduces the risks for a newcomer to the sector like me. It's a long way from where I live and I'm intending to use a specialist holiday let management company for managing the bookings, cleaning and maintenance, although your experience has prompted me to make sure I ask a lot of questions about exactly what they will and won't do. The property has high ratings and commands a good turnover but I can see how that could be very easily lost if standards were not maintained.

    I've been studying the market in that particular area for a couple of years and I have a tick list of requirements which not many properties fulfil, and this one does. It's the same approach that I used for the buy to lets; and that seems to have worked OK. You are right that it's a very different business model, but I'm looking for a new challenge.

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    Go for it girl

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    After much research I've come up with a compelling reason for buying the holiday let in my own name rather than through a company.

    The funds for the holiday let have come from remortgaging two of my BTLs. According to HMRC this does not incur tax if the funds are released to support the letting business. Although holiday lets and domestic lets are treated differently for tax, there is nothing in the HMRC pages to suggest that using funds released from remortgaging one class cannot support the other.

    However, I think it would be stretching it to describe a company-owned holiday let as part of the same portfolio.

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    If you are buying holiday homes I would bare in mind this fact

    a great number of Holiday Home owners are not like by local folk

    similar reasons as BTL we are seen as taking homes away from the locals

    I would not be surprised one bit if more taxation was not used as we have seen in the personal BTL world

    If I was going down your path I would consider using a company for holiday home purchase

    You don't want to be caught like most of us with personal investments

    None of us know what will happen in future years

    but best of luck on this I hope all goes well and keep us updated on your efforts

    DL

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.