Explain this please….

[RickyGervaislovesdogs]

Couple are married and live together and own their home…..

Both then become joint Directors of a limited company which purchases another house.
They both own equal shares in this company. This company owns the second property.

One of them then moves into this second property which is owned by their limited company.

Why would someone do this?

Are they trying to avoid Capital Gains Tax? Claiming that house A is is his main residence and house B is hers? Not sure if that will fly by HMRC

They are separating pending divorce

The second property is on the doorstep of a really good over-subscribed school

CGT avoidance - as described above

@ClicketyClickPlusOne @BruceAndNosh thanks both.

Children are adults- so nothing to do with schools.

CGT avoidance or divorce - hmmm no idea.

What would they gain from it if divorcing? It sounds very risky, you’ll be tied together financially forever won’t you? Had no idea that this was a thing, why wouldn’t all married soon to be divorced couples do it?

Perhaps they were going to rent it out initially but then they fell out and now one of them has moved out?

BTW, I'm not so sure about the CGT thing. I don't see how a limited company buying a house will save on CGT in any way at all.

As I said, I doubt HMRC would make it that easy to avoid CGT. Otherwise everyone who owned a holiday home would do it

No divorce. Can’t see what they’re getting out of it at all. Maybe they’ll flip it or rent it, tis a mystery!

A company would pay CGT on land and buildings if it makes a chargeable profit. The company can do what it wants but I don’t think living in the house makes much difference if the company owns it. It’s still an asset of the company, not the individual.

Sorry - might be corporation tax.

Stamp duty? Does this avoid the multiple property percentage?

Any reason you can't ask them?

Saves council tax? Empty homes here are 2X council tax, one person occupying means a discount. Empty houses are a fortune to insure - saves on that?

If the company runs at a loss, CGT will be minimised when sold.

None of this sounds particularly sensible financial planning though, so I guess it’ll be a personal reason.

Tax planning.

They are very rich, happily married but one of them snores?

Some councils charge double or even triple council tax for second (or even just empty) owned homes here in Wales. Maybe they have only "moved in" on paper to avoid this cc

Depending on the value of the property there are a whole host of tax reasons why this is a bad idea, so it's definitely a weird thing to do.

Because you can claim mortgage interest as a business expense against your profits to reduce your Corporation Tax bill.

Some interesting thoughts~ thanks all.

I’ve heard of this with minimising IHT. It could have been advised to do this to minimise IHT.

It minimises IHT but CGT is still a factor and it depends who ends up owning the company and its assets.

Share holders might be different to directors, so they may have bought the property with other people and one of the directors then becomes the live in manager or just regular renter?

i am not an Accountant but its probably tax related
If the property is rented out later then doing it via a company can be more tax efficient because you can offset expenses against CT and also pay yourself a salary and divis from the company and possibly save money on the rental income
As for one of them moving in it might be to avoid CGT as its seen as the primary property
Probably won't actually work as HMRC aren't totally useless but it might

One is an MP and they're cheating the expenses system?