Limited Company - What Can I Do With The Money?

[zuby84]

Hey guys,

Just about to set up a limited company and provide primarily my own medical services/GP healthcare through it. I missed speaking to my normal accountant on Friday and just a quick query if that's ok.

Say for example I make £100,000 profit. After corporation tax; I am left with £80,000. I want to keep the £80,000 in the company to minimise my personal tax. Can the ltd company invest in anything it wants with this £80,000 or does it have to be related to the core business (ie medical services)? I am looking for a way whereby I can purchase investment property using company profits. Is this possible?

Thanks

[Lawrence5]

Depends on articles I'd set up a sub and Put the money in probably as a loan. Can hive it off easier at a later date.....

Get proper advice though

[Eric Mc]

A company can do what it likes with its own money subject to -

the law

what its Memornadum and Articles say

[zuby84]

That's what I had thought all along. But I had a meeting with a suppossedly "medical accountant" who formed part of a larger accountancy firm and he told me "no, no, keep your property and medical locuming work seperate, there's no way to do that together." Just further proves my theory that most so called professionals like the simple and easy things and don't really think outside the box and often give the wrong advice so things can be kept in nice little boxes for them! Just because 95% of locum GP's are better not going through a limited company; does not mean that he should give the same advice to the other 5%! Do your own DD! (ie asking on pistonheads) What a joker; that bit of advice could have costed me dearly!

Anyway, going to call my "normal non-medical" accountant tommorow to confirm.

Cheers

[mrmr96]

What firm was he from?

[Olf]

keeping 80 in the company is not minimising your tax - it's actually not making the best use of your personal tax allowances for the year by any stretch. You should be taking a dividend for up to the higher rate tax limit surely?

[zuby84]

If I withdraw the money and pay 40% income tax; the left over I will have (after living expenses) will just go towards purchasing investment property anyway in my personal name. By keeping the 80k in the company; I can invest that money through the company. I don't need much to live off and would rather invest paying 20% tax through a company rather than 40%+ through my own name if that makes sense. Ofcourse the right mix of dividend/salary etc... has to be thrashed out with the accountant.

I really hope my accountant confirms that I don't have the wrong end of the stick here...

[NorthDave]

Is there not an advantage to keeping things separate? Say you balls something up and get sued suddenly your property portfolio is at risk too.

For this reason I keep my business and investments separate - otherwise it is all your eggs in one basket.

[zuby84]

Yeah, I'm aware of that. But I will have personal medical indemnity insurance and I'll be sued as a doctor rather than the ltd company if there is a negligence case against me.

With a holding company, can I transfer funds from one to the othr tax free? I suppose this will limit potential liability on the medical side of things.

[Eric Mc]

zuby84 said:

If I withdraw the money and pay 40% income tax; the left over I will have (after living expenses) will just go towards purchasing investment property anyway in my personal name. By keeping the 80k in the company; I can invest that money through the company. I don't need much to live off and would rather invest paying 20% tax through a company rather than 40%+ through my own name if that makes sense. Ofcourse the right mix of dividend/salary etc... has to be thrashed out with the accountant.

I really hope my accountant confirms that I don't have the wrong end of the stick here...

Why do yyou think you will be charged 40% tax on the money being withdrawn from teh company?

[zuby84]

I don't know much about tax, but if I draw a mix of salary/dividends; I'll comfortably go into the 40% bracket. Maybe dividends are a bit less? But I'd rather still pay 20% corporation tax, buy assets and then only pay a further 20% on the profits that the assets make... rather than a 30-40% cost to purchase asset and then income taxed at a further 40%+. Double whammy! I could have all this backwards, but that's how I understand it for the time being.

[Olf]

zuby84 said:

I don't know much about tax, but if I draw a mix of salary/dividends; I'll comfortably go into the 40% bracket. Maybe dividends are a bit less? But I'd rather still pay 20% corporation tax, buy assets and then only pay a further 20% on the profits that the assets make... rather than a 30-40% cost to purchase asset and then income taxed at a further 40%+. Double whammy! I could have all this backwards, but that's how I understand it for the time being.

You need to speak to an accountant - honestly speaking, it seems to me you are working on a limited level of understanding and taking advice here on that foundation isn't going to help you.

[Eric Mc]

zuby84 said:

I don't know much about tax, but if I draw a mix of salary/dividends; I'll comfortably go into the 40% bracket. Maybe dividends are a bit less? But I'd rather still pay 20% corporation tax, buy assets and then only pay a further 20% on the profits that the assets make... rather than a 30-40% cost to purchase asset and then income taxed at a further 40%+. Double whammy! I could have all this backwards, but that's how I understand it for the time being.

Partial knowledge is often worse than no knowledge aty all. If you haven't appointed an accountant, do so as quickly as you can.

You can time your withdrawls from the company to straddle two or more tax years so you might be able to make better use of personal tax bands and allowances. In certain circumstances you might be able to make use of Capital Gains Tax rates and bands.

[R11ysf]

zuby84 said:

I don't know much about tax, but if I draw a mix of salary/dividends; I'll comfortably go into the 40% bracket. Maybe dividends are a bit less? But I'd rather still pay 20% corporation tax, buy assets and then only pay a further 20% on the profits that the assets make... rather than a 30-40% cost to purchase asset and then income taxed at a further 40%+. Double whammy! I could have all this backwards, but that's how I understand it for the time being.

As above, you need to understand more what is going on. You can take up to the higher tax rate without incurring any personal tax as it is given relief from the corporation tax paid. Also, if you buy you primary property in the company and it goes up in value you will pay tax on that increase. The money will still be left in the company and you will still have to pay some form of tax to get it out.

I'd get proper advice, maybe form another accountant if you don't trust this one, and listen to it all.

[russ_a]

If you let me manage your money I will make sure only 35% is deducted.

[zuby84]

Thank guys. Have spoken to my regular "non-medical" accountant and he confirms that this can be done. It was just the concept I was wanting to confirm here rather than the nitty gritty which ofcourse is left up to an accountant.

Ofcourse I needed to speak to my accountant (just couldn't last the weekend, as I'm impatient!) I don't pretend to know as much about tax as many of you guys on here; but I like to know a bit/do my own research about what I'm talking about when I speak to other professionals.

Cheers