Readers’ forum: From the frying pan into the fire?

My client has run a consultancy business via his own limited company. Turnover has been in excess of £100 000 each year and the company had built up cash reserves as not all of the profits have been extracted by way of dividend. The client now wants to gradually wind down his consulting activity and use the cash in the company to fund the acquisition of properties which will be let out for short terms as holiday accommodation or via Airbnb. The balance of acquisition costs being raised via bank borrowings.

This seems a tax efficient way of proceeding as it avoids his having to pay tax on funds extracted to purchase the properties in his own name. I’ve warned the client about the long-term issues of extracting funds from the company if and when the properties are sold. However I am concerned about VAT – the...