Structuring property ventures
At its most basic level, property can be held either directly (by you as an individual, whether wholly or in partnership with another person(s)) or indirectly through a company or a discretionary trust. This note does not consider trust ownership of property or ownership through a self-invested personal pension (SIPP), but we can advise you on these areas if either is an option you would like to explore.
It is often the case that people look to tax considerations to drive the choice of property holding structure, but you should not overlook the importance of the impact that finance-raising and general practicalities can have on structuring. Whilst this note is aimed at explaining the relevant tax issues for structuring, before making any final decision on structure you should also consider:
(i) how you want your business to operate administratively (do you want the additional accounting and administration costs that go with using a company?)
(ii) how you want to deal with succession (when you want to exit your business is it something you want to pass to your children, would you want to shut it all down or would you sell to a third party?)
(iii) will you need to get external finance to assist with the cost of purchasing property, and if so, what are the bank lending criteria like if you operate as a company as against direct ownership (this is one reason why discretionary trust structures often do not work)?
(iv) do you want to retain profit in the structure to grow it, or do you need the profit to cover your day to day lifestyle?
(v) are you using the structure for one project or for multiple projects?
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