Can my company buy a holiday let?
Yes, you can purchase a holiday let through your existing trading business, provided your business is a trading limited company. If your business is not a limited company then you are treated as a private individual for the purchase. You can buy a single unit holiday let property or a complex of units or a holiday let business which is also a trading limited company. You will be eligible provided that your current company organises the correct or additional Companies House SIC code (68209 is for “letting and operating of own or leased real estate”).
Accountants, acting for their clients who own trading limited companies, will extol the benefits of the purchase of a holiday let businesses or property through their client’s company. There can be considerable tax and other advantages to this recommendation.
One of the significant issues is SDLT. If your existing limited company buys one or more holiday lets which are themselves not in a limited company then the higher rates of SDLT are payable, as they would be for a private individual. Any residential property that is purchased with a view to be let, incurs the charge. Properties restricted to holiday let use only, which ties them to the use, are still hit by this SDLT surcharge; unlike other commercial property.
However, if the property(ies) that you are buying are already in a limited company and many larger holiday businesses are owned by limited companies, there is an alternative way of purchasing these without triggering an SDLT event. Purchasing the property directly as a company asset will trigger an SDLT event, BUT purchasing the limited company itself, necessarily including all its assets and including the property(ies), by buying all the shares of that company will not trigger the 3% charge. SDLT is payable but only at the rate payable on the purchase of the shares i.e. 0.5% on the entire purchase price. This method is not an avoidance measure, it’s a non SDLT event. We posted a case study recently on this one, which was a complex holiday let purchase, via a Ltd Company. A share purchase works because at the land registry the title deeds do not change because the current limited company still owns it. The change takes place at Companies House which shows that you now own the company. Cost savings can of course be huge.
For completely parallel reasons, purchasing through a limited company (as an SPV) can also be very attractive on sale, as the purchaser can opt for the share purchase route. This of course can put the company vendor in a very strong negotiating position.
As always in such cases, its advisable to seek advice from a qualified accountant and solicitor before embarking on any commercial property transaction.