Can a Ltd company buy stocks ?
Discussion
Eric Mc said:
Why would it want to?
Diversification is one reason. Another is if the company is generating excess cash that it cannot usefully invest in into its own projects. Another is taking advantage of other companies' management teams. Let me try and think of an example. Oh yes, Berkshire Hathaway (and many others).
In theory, yes.
In practice most companies with surplus cash will invest it in the money markets so they can draw it down to match anticipated cashflow. Buying shares (for investment purposes) would be strange - unless the company is a fund manager or has specialist experience why not distribute the money to shareholders and let hem decide for themselves how it should be invested.
In practice most companies with surplus cash will invest it in the money markets so they can draw it down to match anticipated cashflow. Buying shares (for investment purposes) would be strange - unless the company is a fund manager or has specialist experience why not distribute the money to shareholders and let hem decide for themselves how it should be invested.
A company is a legal "person" so, by and large, it can do anything a human "person" can do regarding buying and selling things and/or investing.
However, the tax regimes that affect limited companies are different to the tax regimes that affect individuals, so any investment income or gains on such investments will be taxed differently if the investments or gains are being received by a limited company compared to a person.
Investment income (interest, dividends, rent etc) will be taxed at Corporation Tax rates rather then Income Tax rates.
Gains will also be subject to the Corporation Tax rate (20%) rather than the personal Capital Gains Tax rates of 18% or 28%.
However, companies do not get the £11,100 (from 6 April 2015) annual Capital Gains Tax allowance that individuals get.
Also, once a company has received its investment income or its Capital Gain and paid the relevant tax, if the individuals want to extract that income out of the company they will most likely have to pay Income Tax when they do - so there is the potential for double taxation on essentially the same block of money.
However, the tax regimes that affect limited companies are different to the tax regimes that affect individuals, so any investment income or gains on such investments will be taxed differently if the investments or gains are being received by a limited company compared to a person.
Investment income (interest, dividends, rent etc) will be taxed at Corporation Tax rates rather then Income Tax rates.
Gains will also be subject to the Corporation Tax rate (20%) rather than the personal Capital Gains Tax rates of 18% or 28%.
However, companies do not get the £11,100 (from 6 April 2015) annual Capital Gains Tax allowance that individuals get.
Also, once a company has received its investment income or its Capital Gain and paid the relevant tax, if the individuals want to extract that income out of the company they will most likely have to pay Income Tax when they do - so there is the potential for double taxation on essentially the same block of money.
db10 said:
Dividends received by UK companies are exempt from tax under normal circumstances - so that answer is not correct
only individuals in the higher or additional income tax rate bracket pay additional tax on a dividend received from a uk company as they carry a tax credit with them.
Certain conditions have to be met to obtain these exemptions.only individuals in the higher or additional income tax rate bracket pay additional tax on a dividend received from a uk company as they carry a tax credit with them.
Other non-dividend investment income will be subject to Corporation Tax.
The UK ltd company's position is not affected afaik by the domicile of the main shareholder.
Might be interesting for the shareholder to set up an offshore company that can invoice the UK company for services rendered by the non-dom, thus transferring profits into a low tax environment.
But your mileage may vary, objects may be closer, may contain nuts and no liability taken if you end up in clink for tax evasion.
Might be interesting for the shareholder to set up an offshore company that can invoice the UK company for services rendered by the non-dom, thus transferring profits into a low tax environment.
But your mileage may vary, objects may be closer, may contain nuts and no liability taken if you end up in clink for tax evasion.
Eric Mc said:
Certain conditions have to be met to obtain these exemptions.
Other non-dividend investment income will be subject to Corporation Tax.
Given the nature of the question I rather assumed the company in question was small. Anyway so glad we agree that the div is unlikely to be taxableOther non-dividend investment income will be subject to Corporation Tax.
From an Ltd perspective there is no reason at all as to why it cannot trade in listed equities.
However, I suggest you look at it from a broker's perspective. The other year saw ESMA bring in a whole draft of trade filing requirements and obligations that now mean many firms just don't bother accepting corporate accounts as it's no longer cost effective.
However, I suggest you look at it from a broker's perspective. The other year saw ESMA bring in a whole draft of trade filing requirements and obligations that now mean many firms just don't bother accepting corporate accounts as it's no longer cost effective.
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