Improving business performance

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Improving business performance
through understanding business
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Tax Efficient Acquisition of Property Ned
Gladney Director - OSK Tax
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Agenda

• Why
• How
• When

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Why - Historical Performance
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Advantage of property over other asset classes

• Gearing
• Tax Effective

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Scenario Use of Gearing
Equity to invest 300,000
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Tax Effectiveness
Assume 5 annual annual return
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Cashflow
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5 p.a Growth x 10 years
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How?

• Current climate
• Rental returns low but
• Interest rates also low

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Capital Repayments Problem
Illustration
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Tax Computation
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Cash Flow - no tax shelter
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Classic Solution 1

• Acquire designated property
• S.23 still available
• Dublin
• Upper Shannon Region
• Some small Town renewal schemes
• S.50 Student Accommodation
• No more post 31-12-04

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Cash Flow - Tax Shelter
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Classic Solution 2

• Reduce level of borrowings

12,000 borrowings of 170,000
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Current Thinking

• Interest only loan

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How is loan to be paid off?

• Interest only 5 years - hope for rental/capital
  growth
• Interest only to retirement - pay off from pension

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Scenario 1

• Existing trading company
• Property in company
• Problem
• Aim is to sell trade but retain property

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Solution

• Extract property from company now
• Interest only loan
• Company pays rent interest on loan no tax
• Company funds pension to enable pay off loan at
  retirement company gets tax deduction
• Result - Personal Ownership funded by company -
  tax effective

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Considerations

• Costs Legals
• Stamp Duty
• CGT
• Based on market valuation
• Current low valuations

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Scenario 2

• Client wants to acquire an investment property
• Rent will not service loan
• Solution
• Interest only
• Fund pension to eventually pay off loan

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VAT Recovery Scheme

• Can be very attractive for residential property
  investors

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Residential Investments

• Interest only loan available from Govt
• Reclaim VAT on new residential properties
• Charge VAT on rent
• Tax effective
• Requires detailed planning
• Beware of pitfalls

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When?

• There is more money lost through indecision than
  bad decisions

Tony Soprano
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Tax Aspects of Pensions Ned Gladney Director -
OSK Tax
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McCreevey Changes F.A. 2000

• Gave ownership of pension back to contributors
• Self Administered pension scheme allows
  investment control by owners
• Pension contributions tax allowed
• Pension fund is tax exempt

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Tax Aspects - Pensions

• At retirement
• Tax Free - 25 fund
• Extraction of balance will cost income tax _at_ tax
  rate

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Tax Aspects of Pensions

• 75 remains in ARF
• ARF - tax exempt status on income
• Withdrawals subject to income tax
• Ownership and control continues
• Estate planning

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UK Property Syndicate

• UK COMMERCIAL PROPERTY VEHICLE
• A NO FUSS INVESTMENT IN THE UK COMMERCIAL
  PROPERTY MARKET
• Small Initial Entry Cost
• Gearing available at 100
• Pension option available