The Business Exchange Swindon & Wiltshire November 2014 | Page 13

FINANCE Old Mill enhance farm service Hear it from the experts… Leading rural accountants Old Mill have appointed an agricultural finance specialist to enhance their offering to farming clients. AMS Accountancy offer their advice on investment property Mike Awre, who recently retired from his role as Regional Agricultural Manager for Lloyds Bank Agriculture, has joined the Melksham office as a consultant. Mike, who worked for Lloyds for 45 years, has spent the last 20 years focussing solely on the agricultural community. He will be able to help clients with all the financial aspects of their business; something that is becoming increasingly important with the recent downturn in farm prices and the uncertain outlook. Mike, who has plenty of experience with what he calls ‘challenging proposals’, says he is looking forward to using his experience at Lloyds to help farmers build better relationships with their banks. He said: “I am a great believer in encouraging communication with the banks, and hope that in my new role I will be able to help businesses with this, whether they are looking at cash flow problems or the more positive plans for new projects and enterprises.” Richard Haines, head of the Old Mill Melksham office said: “Mike’s wide ranging experience combined with the fact that he is already so well known and respected “Should you buy an investment property through your limited company? I’m often asked by clients whether they should buy an investment property personally or through their own limited company. This is a grey area and there are factors to consider: throughout the South West will be a huge asset. “We are excited to have Mike joining our team. His quiet calm style of advice is well respected by the farmers he has dealt with in Wiltshire and North Somerset over the years, and he has so much experience that he will significantly enhance the offering we can offer to our clients.” Article by Peter Bromiley ACA Technical Director Level of rental income If the property is being bought for its high rental income – rather than its potential capital growth, then generally speaking, income is better through a company (subject to corporation tax at 20%). The income can then be retained, or paid out as dividends, in a tax-planned way, hopefully avoiding higher rate income tax. If a property is personally owned, rental income is taxed when received; plus company monies used to fund a deposit would be treated as extra dividends – meaning extra income tax. Capital Gains If it is being bought for potential capital growth – rather than its rental income – then it could be advantageous to buy it personally - maybe in joint names with a spouse, to use the annual exempt capital gains amount of £11,000. The balance of the capital gain would be taxed at 18% or 28%. In a company the gain would be taxed at 20% and may be taxed again when it is paid out as dividends. However, if you buy properties to sell – rather than as a long term investment, HMRC would seek to treat any profits as trading income, subject to income tax (and national insurance), rather than as a capital gain. In this case, the limited company option would be better. Practicalities Lenders: The demands of a mortgage lender may dictate what route you go down when buying the property. Risk: If your limited company is in a risky industry, then any of its assets – including an investment property are vulnerable. In that instance, a property would be safer if personally owned. Weigh up these factors carefully before making a decision. Ask AMS Advice for small businesses Should I set up a pension through my Company (owned with my wife)? Or pay it from my own income? A: Firstly, you should consult a Financial Advisor when deciding to set up a pension scheme. If the Company pays for the contributions, you and your wife will share the tax relief. If you make the contributions from your own income after taxes, you will receive all the tax relief. If one of you is a Higher Rate Tax payer (taxable income over £41,850), then you should try to make sure that the tax relief goes to the higher earner. The timing of contributions could affect your decision. If your own taxable income fluctuates, then it is more beneficial to make your contributions in a high earning tax year. If your taxable income is steady, then it is not usually an issue. Peter Bromiley ACA , AMS Accountancy Ltd., Swindon SN5 7XF 01793-818400 [email protected] www.ams-accountancy.co.uk THE BUSINESS EXCHANGE 2014 13