can i use company money to buy shares?

[simongallup]

This maybe a silly question but I have a side business that is a limited company thats has 10-20k in the bank. Can I invest this money in shares as I can as an individual? am going to an acc's this afternoon but thought I'd check on here before looking too folish!

[Eric Mc]

Who will own the shares -

you or your company?

[simongallup]

Eric Mc said:

Who will own the shares -

you or your company?

the company ( although its just me that owns it )

[Eric Mc]

OK so:

i) the bought company will become an "associated" company - perhaps even a subsidiary - of the original company.

ii) dividends paid by the bought company will be payable to the original compsny, not you personally and will therefore be subject to Corporation Tax (rather than Income Tax).

iii) the ownership of the shares in the company will need to be declared in the notes to the accounts of the original company.

iv) the new company may need to make discloures of its own regarding the fact that some of its shares are owned by another company.

v) depending on the income levels received from the dividends paid into the original company, this could compromise the original company's "small trader" status (I am assuminmg it is a small trading company).

[simongallup]

thanks - nothings ever easy!

[Hendry]

Of course, if you are buying small shareholdings in much larger publicly traded companies then some of the disclosure sthat were pointed out won't need to be made, nor would they risk you losing small trader status.

IH

[Eric Mc]

Hendry said:

Of course, if you are buying small shareholdings in much larger publicly traded companies then some of the disclosure sthat were pointed out won't need to be made, nor would they risk you losing small trader status.

IH

My answer was couched in the way it was because I took it that the company in which he wanted to buy shares was another small trading company rather than a PLC.
If his current trading company bought substantial shares in a PLC and started deriving substantial income from dividends, then it could have an affect on the small trading status - although that scenario is highly unlikely, I admit.

simongallup - What happened when you visited the accountants?

Edited by Eric Mc on Thursday 13th November 11:27