Company
An investment property under this structure enjoys the benefits of limited liability because it is a completely separate and distinct legal entity from its owners , but there are limitations to the tax efficiencies that can be applied .
Companies will attract higher compliance costs and there are some possible complications with capital gains when selling any property to related parties .
Capital gains can only be distributed , tax-free , upon the wind up of a company . This fact needs to be considered if you are planning on holding multiple rental properties in the same company .
One of the tax benefits that companies enjoy is the automatic deductibility of interest , regardless of the intention of the loan . This is in contrast with the other business structures outlined here , where interest is only deductible on loans that were originally taken out on the property .
Again , there are complications around taking out loans and drawing cash out of the company , and it is a very different situation when compared to the sole proprietor / partnership model .
We recommend seeking the professional advice of a chartered accountant about whether a company structure is right for your investment .
Look through company
This is the successor to the Loss Attributing Qualifying Company ( LAQC ). It ’ s an ownership model that still benefits from the limited liability of a standard company structure , but with the added benefit of being far more tax efficient .
Taxable profits or losses ( apart from residential property losses which are ring fenced ) are passed straight through to its shareholders in proportion to their shareholdings , then tax is paid at their respective marginal tax rates .
This is a model that is less flexible in terms of tax when compared to the distribution options available to trusts , but compliance costs are generally lower than those of a trust .
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