Purchase of property via a company or personally?

A successful company will hopefully get to the point where it grows out of its existing property and is looking to expand. There comes a point when a decision needs to be made as to how to structure the new property purchase. The main options are whether to purchase via the company or purchase personally. There are other options (eg using a trust or even in some cases an offshore company) however for most people these won't be relevant. For many people it's likely to be more tax efficient to purchase the property personally rather than via a company. The main downside to using a company to purchase the property is that a disposal of the property in the future would be subject to a substantial tax charge, both in the company and on the extraction of any proceeds by the shareholders. The company does not qualify for taper relief but only gets the less attractive indexation allowance (to give relief for the effects of inflation). In addition if you own personally you've always got the option of going overseas and selling free of UK CGT completely. If you use a UK company to purchase the property, the company will be automatically subject to UK corporation tax. The main option to avoid this would be to claim rollover relief. This is available for a property that is being used for the purpose of the company's trade, and would essentially defer the gain if new business premises were purchased. However, in order to gain a full deferral the full proceeds would need to be reinvested which would prevent the relief where the shareholders are looking to extract profits from the disposal. A more beneficial option may be to purchase the property personally. Any gain on future disposal would then be assessed directly on the owners. If the property was used for the purposes of a trade carried on my an unquoted trading company full business asset taper relief would be due. This would reduce any gain by 75% leading to an effective 10% rate of CGT. This is a substantial tax reduction over the company option. If required the company could pay a market rental for the use of the property. This would be tax deductible for the company, but would be taxed on the owners directly with Income tax at 40% but no NIC. The main problem with owning personally is inheritance tax. If you purchase personally the best you'll get is a 50% reduction in the property value and this is only if you control the company. By contrast if you purchase via a company the value of the shares should be fully exempt from IHT providing the company is a trading company. For many people the key issue will be the future gain on disposal. Given the rate of property price growth minimising future taxes on this is paramount especially as this can often be regarded as a bit like a 'pension pot' by the shareholders. check out articles such as when NOT to use a company and buying a commercial property via a company for more info on this.