Putting a plane in a limited liability company is never going to protect the pilot or his estate – because anybody suing is going to go after the operator and the pilot, jointly and severally.
It protects the other syndicate members – those who were on the ground when the said pilot crashed the plane into [insert your favourite Daily Trash phrase]. These members are otherwise liable – ref UK Civil Aviation Act (don’t recall the clause but many people have looked at it).
Interesting discussion.
Our intensions of running the syndicate through a company would purely be to regulate the membership and relations in a known environment where you have a good structure for enforcable agreements. In my view, joint private ownership with “rules” written on a napkin in the bar, is a doomed to fail unless the amounts involved are trivial.
Howard, I have to admit that the my accounting experience is not on the UK tax regime, but on IAS….which is different and most tax authorithies couldn’t care less what your official books are saying about the real economics of the company. From a membership regulation and valuation point of view, I would just want to plan for the expected overhauls as you know them, but it WILL be an issue if the build up of an accrual is seen as profit by the HMRC. You may not be around when the overhaul occurs and you have the corresponding tax loss.
Coming back to my original question, I guess the HMRC makes a company setup unfeasable. Question is, what then? What do other people do?
HMRC doesn’t make a company setup unfeasible but just don’t expect to get VAT registration. You can of course run it as a company without being VAT registered.
IME, HMRC don’t care about a Ltd Co making a loss, but they won’t like it if the loss is being relieved into another company which would otherwise make a profit 
That is a not uncommon scenario where a businessman (by definition at least reasonably successful, otherwise he would not be flying in the first place) sets up a ltd co. to operate the aircraft, and then wants to relieve the virtually unavoidable losses from that into his main business. I was advised to set up such a structure by a “street corner accountant” some 12 years ago but it turned out to be a pointless move once the entire picture (over the few years it ran for) was taken into account.
Sadly the absolutely best route on VAT (Denmark) ended in 2009. With that, you could have got a zero-VAT aircraft which avoided VAT registering the operating company and thus avoided the forever-ongoing 20% increment on the cost of flying. I don’t know if other routes still exist… if they do they won’t be publicised widely.
It is however a very good point about how to treat the engine fund because you absolutely don’t want to make a taxable profit as a result of that. That would be totally stupid. I have no idea how Ltd Co syndicates account for it (well, many don’t run an engine fund at all…). I vaguely recall there is a way in Sage to create a regular charge to cover that sort of thing (crap accounting terminology here!).
Peter writes:
Putting a plane in a limited liability company is never going to protect the pilot or his estate . . . . .
Do you have any evidence of this: Every court case I have come across concerning a Limited Company has ensured that the corporate veil is sacrosanct.
If they were to pierce that for a Pilot, every Ltd company in the UK would be similarly liable.
Every court case I have come across concerning a Limited Company has ensured that the corporate veil is sacrosanct.
I didn’t say it isn’t. What I said is “anybody suing is going to go after the operator and the pilot, jointly and severally.”
It’s a different situation for a Ltd Co. doing normal trading. The company officers are protected – provided they haven’t done certain really stupid things (loads of case law on that too e.g. offering “personal” warranties re company performance). There is no personal liability on them in normal trading.
My experience of 10 years is that the best way, as already mentioned, is a syndicate of one. I have been in a group that worked reasonably, with a low cost aircraft and low expectations whilst gaining experience but there were events that could have lead to problems if the costs had been significant.
When I bought a touring aircraft (5 year old AC11) initially I purchased in one of my companies, recovered the VAT, and charged a commercial rate for personal use. After 3 years I was pleased to buy from the company at the market rate including Vat and remove the BIK concern and the mounting accountant’s invoices.
Sole ownership is the only way to control the safety environment of the aircraft. You as owner know how it has been used, the state that it is left in after a flight, the way the avionics have been set up, the fuel situation. You decide on the maintenance company and the attitude to “on condition parts”. The aircraft is available at whim and you can make trips lasting weeks without reference to others. With my annual usage of 150 hours the costs are acceptable.
The aircraft is G reg and I have an EASA IR which I took some years ago. It is a much simpler arrangement. I own the aircraft personally, no trust as on N reg, no Guernsey company as on 2 reg. The downside is the Part M which in fact is no real problem with the correct maintenance company. There is a restriction on the STCs that are available which can be annoying.
With the changes in training and experience requirements for the EASA CBM IR it should be possible to do the majority of the training in your own aircraft in the UK. I do recommend joining PPLIR as I have found the information that they provide invaluable.
For simplicity, dependent on aircraft type, with the recent changes in the IR training, G reg with an EASA licence and sole ownership are attractive.
My aircraft are syndicated in the sense that they both needed an owner so they teamed up to share me 
Total value for both of them is about $60K USD and they’re very nice for my purposes, so no partners needed. Reading this thread reminds me that I’d rather spend my time playing with the planes than on arcane legal and tax stuff. That’s not living, in my world. To each his own.
Costs are actually lower if you fly less – by which I mean I’ve never personally understood the brain damage that some people go thorough to understand and optimize hourly cost. My objective is to own the things and enjoy them exactly as much as I feel like, no questions asked. Obviously on that basis I’d agree completely that sole ownership is good. I feel very lucky to be flying at a time when aircraft prices are decreasing every year, a gift of demographics that compensates for the demographics that drove house prices up every year when I was younger.
Re Part M – it might be ‘no real problem with the correct maintenance organization’ if you predicate the discussion on hands off maintenance. In my world however annual inspections by an A&P IA cost $200 plus parts, all the parts (new and used) and services are bought by me directly, and the planes have never been anywhere near a ‘maintenance organization’. They are however very well managed and maintained by a guy who cares a lot about them – me.
I always get amused me when you receive advise along the lines of “the best way to do X is to do Y instead”. Very helpful :-)
I’ve become a little wiser on what not to do (LTD company, but not a lot wiser on what to do)
What to do is really according to what you can afford.
The best setup is owning the plane yourself. It sidesteps a huge pile of potential (actually very likely) hassles and offers loads of advantages as Steve R mentions (and many more).
But not everybody can afford sole ownership.
If you have to do a syndicate (to spread the cost – there is normally no other reason) then I recommend a limited company, and some simple accounting package on which you set it all up. Forget VAT registration. But really the biggest thing is to choose the members very carefully, and it’s going to be a tough task.
I was doing this 2002-2006 and the majority were, shall we say, unsuitable. I think I have written up some notes here in the past on some of the comical characters… I had just two good pilots; one went when he lost his job (marketing i.e. “feast or famine” existence) and the other went when his wife got pregnant and told him to stop flying.
So, to start with, find the people to do this with. Then look at the structure.
I know of just one syndicate which functions – 2 pilots, both IFR.
