Should a syndicate own via a limited company, or directly?

Peter wrote:

The Ltd Co does introduce the unfortunate concept of the UK Benefit in Kind

An LLP has the advantage of limiting liabilities but is transparent for tax purposes

The UK 5% minimum ownership disappeared about 18 months ago I believe.

There’s no benefit in being VAT registered as VAT would also have to be charged to the members/pilots, who are very unlikely to be able to reclaim it. Corporation tax won’t be a problem because you can easily make sure there’s no profits.

A syndicate has no legal existence, so the members are jointly and severally liable as already mentioned. If everyone gets on it’s the easiest and most flexible option. I’m a member of a syndicat des eaux for a private water supply: when there was a falling out, the legal proceedings went after the president personally. You can’t resign, hide behind the organisation, or close down.

Peter wrote:

Under the UK Civil Aviation Act, direct shareholders are jointly and severally liable

Is there more information on this somewhere @Peter? I had a quick search on legislation.gov and couldn’t find anything.
I was about to say that a limited company allows you to write off the assets and walk away from a problem An accountant will advise, and take care of all the Companies House admin for less than the cost of lunch in Le Touquet.

One thing to beware of is a string of companies. I looked into a vintage (maybe Tiger Moth?) syndicate about 10 years ago, where the shareholders of one company were entitled to fly an aircraft leased from another company, but with no actual ownership of the aircraft. If anything goes wrong you’ve lost your share of the plane.

Is there really a limit of 20 in the UK? For many years this existed if maintained on a Private CofA (due to a minimum shareholding of 5%); with a Public CofA you could have an unlimited # of members. These two CofA types have now gone. I have not been G-reg since 2005 so don’t know current rules but I am quite sure there are syndicates of 25+.

The Ltd Co does provide a measure of liability protection. Under the UK Civil Aviation Act, direct shareholders are jointly and severally liable, which would be a problem if the insurance doesn’t pay out (e.g. due to a license/medical issue) or doesn’t fully cover the loss.

The Ltd Co does introduce the unfortunate concept of the UK Benefit in Kind. This is a complex area, but generally not an issue if all shareholders fly the plane. But every modern country has a similar concept (on private access to corporate assets) to avoid tax avoidance; whether it applies to this aircraft scenario I obviously can’t say.

The Ltd Co provides a useful separation between the syndicate and the principal asset(s).

The overall costs are probably not significantly different.

The UK syndicate has a max of 20 members. Maintenance is unaffected.
But there are advantages. Hangarage, capital tied up, maintenance cost, and insurance are spread. There is little extra charge for insurance.
There can be advantages in being able to call on others to help.
I’ve been in a Jodel DR1050 syndicate for 29+ years, happily.
I’m also 75% owner in a two person Bolkow Junior syndicate, which formed 14 months ago as a four group, and was very toxic until I bought two out. Lawyer involved, one guy got so uptight he was sacked. Only 0.5 hours total flown in 9 months by the two I bought out.

arj1 wrote:

So, if aircraft is used for private flying, then there is no difference?

There shouldn’t be, no.

arj1 wrote:

And what about the maintenance regime? No difference? Any extract checks required?

For EASA aircraft, at least, the maintenance regime is determined by the kind of operation, not the kind of owner.

I can’t really comment on tax (personal or VAT), but on will comment on the difference in liability.

• Any liability arising from the members’ own negligence (e.g. as a pilot) will be the same. A Limited company does not protect you from being successfully sued if you are negligent and do damage, or injure.kill someone.
• In the limited company case, any liability arising from operating the aircraft is limited to the company’s assets (assuming all shares are paid up)
• In the joint ownership case, any liability arising from operating the aircraft is “jointly and severally” the liability of the owners, so the other party can just turn to the richest and get the money from him, who then needs to deal with the other owners.

So, in a nutshell, the limited company protects you from any liability as an operator which is not covered by insurance and exceeds the value of the company asset (the aircraft).

OK; I changed the title

Initially, worth a read e.g. here and a search on

BIK

or

“benefit in kind”

which are relevant to the UK.