Using profit from business to invest in shares
Discussion
Hi all. Being very lazy here, in the nature of knowledge sharing etc though!
I have a small business and with the changes to tax and dividends coming up to reduce the bill, can I use the profit to invest in shares, in turn reducing my Corp tax until any profit is realise and cgt paid etc? Then pay Corp tax on a hopefully higher amount?
I have a small business and with the changes to tax and dividends coming up to reduce the bill, can I use the profit to invest in shares, in turn reducing my Corp tax until any profit is realise and cgt paid etc? Then pay Corp tax on a hopefully higher amount?
Careful with investing in shares with your company. I am not a tax accountant (I'm am IFRS/US GAAP financial reporting specialist) so I'm not overly familiar with tax law here, but...
1) buying shares would not be seen as an expense that reduces profits.
2) it's entirely possible that with the company now owning the (presumably exchange traded) shares, you would have to fair value them and pay tax on unrealised gains. I am not sure if uk tax law permits you to defer the tax until you sell the shares, and I am also not sure if whatever accounting standard small companies use these days permits you to hold investments at cost, or requires you to revalue each year.
Seek advice. You're at the confluence of tax law interacting with fair value accounting. This is a tricky place to be.
1) buying shares would not be seen as an expense that reduces profits.
2) it's entirely possible that with the company now owning the (presumably exchange traded) shares, you would have to fair value them and pay tax on unrealised gains. I am not sure if uk tax law permits you to defer the tax until you sell the shares, and I am also not sure if whatever accounting standard small companies use these days permits you to hold investments at cost, or requires you to revalue each year.
Seek advice. You're at the confluence of tax law interacting with fair value accounting. This is a tricky place to be.
Wololo said:
Careful with investing in shares with your company. I am not a tax accountant (I'm am IFRS/US GAAP financial reporting specialist) so I'm not overly familiar with tax law here, but...
1) buying shares would not be seen as an expense that reduces profits.
2) it's entirely possible that with the company now owning the (presumably exchange traded) shares, you would have to fair value them and pay tax on unrealised gains. I am not sure if uk tax law permits you to defer the tax until you sell the shares, and I am also not sure if whatever accounting standard small companies use these days permits you to hold investments at cost, or requires you to revalue each year.
Seek advice. You're at the confluence of tax law interacting with fair value accounting. This is a tricky place to be.
Thanks Wololo - it may be the benefit I think I'll get will actually end up at a greater cost. I'll speak to a couple of my accountants.1) buying shares would not be seen as an expense that reduces profits.
2) it's entirely possible that with the company now owning the (presumably exchange traded) shares, you would have to fair value them and pay tax on unrealised gains. I am not sure if uk tax law permits you to defer the tax until you sell the shares, and I am also not sure if whatever accounting standard small companies use these days permits you to hold investments at cost, or requires you to revalue each year.
Seek advice. You're at the confluence of tax law interacting with fair value accounting. This is a tricky place to be.
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