I was talking to a client, a yesterday, a potential client who had been following my blogs on property. And this is an important I suppose aspect to understand. He had invested in property over the last 10, 15 years, and he had accumulated a portfolio of 1516 properties and what some of which were in the limited company.
Because as you know. Laws changes to what is deductible in your, in your own portfolio, but some of the deductions are available in them as a company. Did you watch my blogs? You’re also aware of the risks of them extending the, the restrictions, two limited companies that they’ve extended to personal in terms of interest deductibility.
That being said, this, this potential client was about to put four properties from his. Personal, well, it’s folio into a limited company they had already formed. And he called me and said, look, you know, my accountant doesn’t really understand this. I’ve been following you for some years and you clearly understand property and I know you’ve got 50 properties or whatever.
And so I’d like to get your opinion and I get, well, some tell me what you’re looking at. And he goes, well. You know, we’re about to finish convincing and about to put four properties in and I want to see if there’s any way of avoiding scam Jagan as well. Look, you seem juggle already. You’re already underway.
You’re already a long way ahead of the process before, you know, planning should happen early rather than reflective of last moment. Check with your solicitor, see if he’s aware of these, these rules regarding incorporation of a portfolio. And if he doesn’t, then come back to me. And he came back to me.
I said, no, he doesn’t. And I said, well, look, you know, there’s certain things we can do. But are you aware that, on moving these properties across, there will be a capital gains calculation and not capital gains calculation may be from what you’ve told me, will results in a significant capital gains tax.
Have you allowed batching your cashflow. I could sense was silence the other end of the phone because he clearly hadn’t obviously admitted to me that he hadn’t, and that threw the whole thing into the air because he wasn’t aware of it. He hadn’t consulted somebody who knew what they were doing. He was just going in because he thought he was a good idea.
And all I can imagine would be, he would have done it had he not called me, he would have done it. And then got landed with a massive bill, which you wouldn’t have had to be able to, would you be able to cash flow? So there’s so many elements here. You know, there’s planning that wasn’t done at the right time.
There was people advising him who didn’t really understand it. He was taking action without consulting. People really understood it. And the final thing was he didn’t really want to spend the time or the money to do the plan because. He just thought, well, I just need a simple answer. Well, if the answer was that simple, you would have got it right in the first place, and he didn’t get it right in the first place.
Clearly he got it reasonably wrong and it would have cost him. I mean, we were talking about saving him over 80,000 pounds just in stamp duty, and that alone, the God knows how many thousands in capital gains tax by doing it properly. So I must, you know, I must caution that if you’re listening to me and watching my blog, just because you’re watching the blog doesn’t make you an expert.
And sometimes we need to take time and looking at your specific situation. And I don’t apologize for that because if we get it wrong, you end up with an 80,000 pound stabbed GT Malora 50,000 pounds or 250,000 pounds, capital gains tax bill. And if that’s unforeseen and on plan, that’s going to really, in a way do you find a hundred thousand pounds of extra tax?
It’s, it’s, you know, it’s not just. It’s not worth not doing the planning and spending a bit of time. If you’re saving 18,000 a hundred fifty thousand three hundred thousand isn’t it worth spending a little time and money getting the planning right. And you know, his sort of closing comments to me was, well, if you say it’s complex and whisky, then I’m not going to do it.
And I basically said, sir, fair enough. Please don’t do it. But just understand because it’s complex and risky, you hire us to find a route through the complexity, and you hire us to do, exclude and eliminate the risk to the extent it can be. Most of the time it can be completely. And so my message is, if you’re looking at doing something in your business, make sure you’re surrounded by people who understand and been there before, who know what they’re doing.
Because otherwise you stand the risk of wasting money, losing money, or sometimes in fact, hurting your cashflow to the extent that we then call one business. So that’s it for this. I just felt compelled to some, raise this with my community because it is so important that we understand that, you know, sometimes planning.
Takes a bit of time and it costs a bit of money and then, you know, it’s worth doing. You wouldn’t buy a property without doing a survey on it. And so why would you take an action that could cost you 10 times as much as you know, the survey might’ve saved you. So let me leave you with that.
Is this going to sell out? Take care goodbye.
