New company having shares in existing company
New company having shares in existing company
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Dr Solomon

Original Poster:

64 posts

185 months

Thursday 12th July 2018
quotequote all
I have a trading Ltd company and I want to set-up a new company to invest in property.

Are there any risks to setting up the new company having shares in my existing trading company so that I can issue it a dividend as/when required?

Eric Mc

125,770 posts

295 months

Thursday 12th July 2018
quotequote all
Which company would be issuing the dividends?

Dr Solomon

Original Poster:

64 posts

185 months

Thursday 12th July 2018
quotequote all
Trading Co would issue dividends to Investment Co. Exact shareholding split of Trading Co (myself / trading co) TBD.

Eric Mc

125,770 posts

295 months

Thursday 12th July 2018
quotequote all
The investment company pays Corporation Tax on its dividend income.

You pay income tax whichever way you extract personal income from either company.

If you do not extract personal income from either company you will eventually pay Capital Gains Tax when you dispose of the companies or their shares. The Capital Gains Tax regime on on trading companies is not as good compared to trading companies. An "investment company", by definition, is not a "trading company".

Dr Solomon

Original Poster:

64 posts

185 months

Thursday 12th July 2018
quotequote all
Wouldn't the money in trading co already be subject to corporation tax so if subject to corporation tax in the investment co (when passed as a dividend) be corp tax'd twice?

For context, I was thinking of this arrangement as opposed to a separate investment co and inter-company loan between the two as these loans would eventually be payable to the trading co and could be called upon in the even that the trading co ever got into trouble.

Edited by Dr Solomon on Thursday 12th July 10:36

Eric Mc

125,770 posts

295 months

Thursday 12th July 2018
quotequote all
Dr Solomon said:
Wouldn't the money in trading co already be subject to corporation tax so if subject to corporation tax in the investment co (when passed as a dividend) be corp tax'd twice?

For context, I was thinking of this arrangement as opposed to a separate investment co and inter-company loan between the two as these loans would eventually be payable to the trading co and could be called upon in the even that the trading co ever got into trouble.

Edited by Dr Solomon on Thursday 12th July 10:36
Talk to your accountant.

Income in separate companies is normally taxed in the hands of the receiving company. You can get "Group Relief" when the income is from one company in a group to another - but it is quite complex so don't assume anything - especially if one company is running a business (i.e. a trading company) and the other is not (i.e. an investment company).