Which is the best option Trust/LAQC?
Question from Su updated on 18th November 2010:
Our expert Mark Withers responded:
*This answer was correct at time of answering, 24th May, 2010
Because the interest on the money you borrow to buy your new home is not deductible against the rent from the old one you may like to consider a restructure. Traditionally this would be done by selling the old home to an LAQC that borrows to buy it.
The LAQC regime is being changed though and these companies will be taxed as flow through entities in future. There will be limitations on the amount of loss that can be claimed, capped at the level of a shareholders economic interest in the company. This may not be too problematic because the LAQC bank debt guaranteed by the shareholders will probably be included in the calculation of their economic interest.
Changes in the shareholding of the company will also trigger the tax consequences of disposal of the companies underlying property asset which will reduce the flexibility currently on offer with the LAQC regime. It may well be appropriate to structure your new private residence in a trust for asset protection & estate planning reasons.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.