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The director and sole shareholder of two cash-rich limited companies that are VAT registered has suggested that they loan money to a new third company which will buy a residential property to generate rental income
My client is the director and sole shareholder of two cash-rich limited companies that are both VAT registered. He has suggested that a third company should be formed of which he will also be the only shareholder and the two trading companies will each lend the new company £150 000.
The plan is that the new company will buy a residential property for about £290 000 plus stamp duty land tax and this will be used to generate rental income. A couple of practical queries have arisen as follows.
My client has suggested that the three companies could form a VAT group so that the new company can reclaim all of its input tax on agent fees and maintenance costs relating to the property through the partial exemption de minimis rules.
The other two companies only have taxable income so does this seem a possibility? What are the...
