Cash in ltd co and very low interest rates

[x5x3]

We have some cash in a ltd co bank account - the interest rate is pitiful.

Anyone have any ideas (preferably ones they have undertaken themselves) for investments

thanks in advance

[pacoryan]

The company can invest in pretty much anything an individual can, you just have to be careful not to make more money from investing than trading. The only specific recommendation I would give is to find a well referred professional adviser to discuss it with - if you don't know one ask your accountant to refer you.

Far too many questions need answering (which you wouldn't do on a public forum) before anything like a sensible investment recommendation could be made.

[Ozzie Osmond]

In reality it all depends upon how you see the future of the business. You have to compare,

• Returns from further investment in developing the business
• Pitiful interest rate from Cretinbank
• If/when you intend to exit the business.

No easy answers.

[Alpinestars]

pacoryan said:

The company can invest in pretty much anything an individual can, you just have to be careful not to make more money from investing than trading.

Why?

[x5x3]

thanks all,

if I said it was £x we would not need for 10 years then does that help?

I do appreciate the rules and regulations about investment advice - I'm asking for potential options not guaranteed returns ;0

[trowelhead]

x5x3 said:

We have some cash in a ltd co bank account - the interest rate is pitiful.

Anyone have any ideas (preferably ones they have undertaken themselves) for investments

thanks in advance

I have set up another company. Trading company loans the other company funds (intercompany loan) so no further tax trigger (unlike drawing divis).

Company 2 invests in residential property. Bought 2 properties so far, property one gross yield 12% property 2 gross yield 10%. After all expenses / voids etc i expect to see more like 8-9%. Will only pay 20% corp tax on rental income if left in company so fairly tax efficient.

Would recommend.

[pacoryan]

Alpinestars said:

Why?

I maybe out of date on this and I'm not an accountant so perhaps one will come along to correct or confirm but I believe the tax treatment is different, for example no Entrepreneur's relief and the scope for off-setting costs/losses is much narrower. Historically there was a higher rate of Corporation Tax payable as well - not so relevant here.

[Eric Mc]

Entrepreneurial Relief still exists for the disposal of assets in trading limited companies. If a company is mainly obtaining its income from investments, the disposal of its investment assets may not qualify for the relief.

http://www.att.org.uk/Resources/CIOT/ATT%20and%20C...

However, what constitutes "business assets", "trading" etc can be quite complex and counter intuitive at times.

Like most UK tax rules, what started out as a simple concept has turned out to be quite complicated.

[x5x3]

trowelhead said:

I have set up another company. Trading company loans the other company funds (intercompany loan) so no further tax trigger (unlike drawing divis).

Company 2 invests in residential property. Bought 2 properties so far, property one gross yield 12% property 2 gross yield 10%. After all expenses / voids etc i expect to see more like 8-9%. Will only pay 20% corp tax on rental income if left in company so fairly tax efficient.

Would recommend.

thanks - that is an interesting idea, I assume you have a commercial mortgage through the ltd co or did you buy outright?

I was looking at this company as a more convinient way to invest in property - https://propertypartner.co

[turbospud]

trowelhead said:

I have set up another company. Trading company loans the other company funds (intercompany loan) so no further tax trigger (unlike drawing divis).

Company 2 invests in residential property. Bought 2 properties so far, property one gross yield 12% property 2 gross yield 10%. After all expenses / voids etc i expect to see more like 8-9%. Will only pay 20% corp tax on rental income if left in company so fairly tax efficient.

Would recommend.

then look for other rental properties in portugal,florida etc;)

[Sheepshanks]

turbospud said:

then look for other rental properties in portugal,florida etc;)

One of our Directors wanted to do this. Our finance guy said "no!".

[turbospud]

Sheepshanks said:

One of our Directors wanted to do this. Our finance guy said "no!".

if its your own company then no one can tell you how best to run it,different when there is a few directors

[trowelhead]

turbospud said:

then look for other rental properties in portugal,florida etc;)

I like your line of thinking.

Alas, I may have to spend a few weeks per year overseeing "renovations" (allowable expenses of course)

[trowelhead]

x5x3 said:

thanks - that is an interesting idea, I assume you have a commercial mortgage through the ltd co or did you buy outright?

I was looking at this company as a more convinient way to invest in property - https://propertypartner.co

Up to now they are owned outright (cheap flats). However i have spoken to a couple of brokers and it seems like it would be reasonable straightforward to raise mortgages via the company.

This is also more tax efficient than buying BTL personally since the new tax changes came in, as interest payments are still allowable expenses.

[trowelhead]

Another idea is P2P lending, assetz capital, saving stream - all asset backed so you have some security. Should be looking at a 10-12% return for your increased risk.

I have no experience with the btl platform you posted however so can't comment there... I personally prefer the control of having the keys

[Alpinestars]

pacoryan said:

Alpinestars said:

Why?

I maybe out of date on this and I'm not an accountant so perhaps one will come along to correct or confirm but I believe the tax treatment is different, for example no Entrepreneur's relief and the scope for off-setting costs/losses is much narrower. Historically there was a higher rate of Corporation Tax payable as well - not so relevant here.

The only material difference is capital gains eg, ER. But HMRC's view is that 20% non trading is sufficient for a company not to qualify. 50% is well over the threshold.

[msport123]

trowelhead said:

I have set up another company. Trading company loans the other company funds (intercompany loan) so no further tax trigger (unlike drawing divis).

Company 2 invests in residential property. Bought 2 properties so far, property one gross yield 12% property 2 gross yield 10%. After all expenses / voids etc i expect to see more like 8-9%. Will only pay 20% corp tax on rental income if left in company so fairly tax efficient.

Would recommend.

Wouldn't an inter company loan create an interest charge from company A to B? Or would company B treat the interest on the loan as an expense and therefore they would cancel each and other out?

[trowelhead]

msport123 said:

Wouldn't an inter company loan create an interest charge from company A to B? Or would company B treat the interest on the loan as an expense and therefore they would cancel each and other out?

• disclaimer - don't take this as tax advice *

I have been told by my accountant that his can be done at 0% rate of interest for as long as needed. He also mentioned it was "tax neutral" if ever i wanted to write off the loan in company a and write off the debt company b, there would be no effect on tax position.

But yes if you did the loan at a commercial rate of interest, it would cancel each other out anyway as it would be income on one side expense on the other.

If you wanted the cash back into company A, i suppose you could charge a very high % rate of interest, then use the rents to pay that interest thus moving cash back over time. That's not my intention however.

[trowelhead]

OP - hth

[x5x3]

thanks - that photo does not open that well for me?