Company Investments...
Discussion
I've got a wedge of cash built up in my company's bank account that I don't want to take it as bonus or dividends because I just end up giving too much of it to Mr Brown.
Ideally I want to invest it in funds, and potentially individual shares. An online dealing service would be handy. I already have a number of funds held by my company, but unfortunately the fund manager that holds them only deal with registered IFA's, and I have fallen out with mine so I want to go down an 'without adviser' route.
I'm spoilt for choice with personal funds, but can't find any obvious takers for company money.
Does anyone else do this? Any recommendations?
Ideally I want to invest it in funds, and potentially individual shares. An online dealing service would be handy. I already have a number of funds held by my company, but unfortunately the fund manager that holds them only deal with registered IFA's, and I have fallen out with mine so I want to go down an 'without adviser' route.
I'm spoilt for choice with personal funds, but can't find any obvious takers for company money.
Does anyone else do this? Any recommendations?
Personally, I'm not a fan of keeping large sums of cash/investments within a company for a few reasons:
1) Currently it's not your cash - it's the companies. As such, if your company got into trouble then the money's up for grabs by all and sundry. Removing the cash / investments 'ringfences' the money.
2) At some point you are going to withdraw the money - so you'll end up paying tax on it at some point anyway. If you sell the company there's a good chance you won't get taper relief on the investments (depending on the level).
3) Having too much cash sloshing around the company can make you lazy. Taking the cash out forces you to run a "lean & mean" company.
1) Currently it's not your cash - it's the companies. As such, if your company got into trouble then the money's up for grabs by all and sundry. Removing the cash / investments 'ringfences' the money.
2) At some point you are going to withdraw the money - so you'll end up paying tax on it at some point anyway. If you sell the company there's a good chance you won't get taper relief on the investments (depending on the level).
3) Having too much cash sloshing around the company can make you lazy. Taking the cash out forces you to run a "lean & mean" company.
"You" wont be investing anything in fundss (or whatever), the company will. Therefore, whatever return the investments generate will form part of the company income and will be subject to Corporation Tax. Also, depending on the nature and size of the investments, disclosures regarding the company's accounting policies on such investments and the nature of the investments themselves will probably have to be included in the notes to the accounts.
If and when the company disposes with the investments, it will generate a Capital Gain within the company which will also be subject to Capital Gains Tax. Although companies usually pay Corporation Tax at rates lower than personal Income Tax rates, they do not receive the CGT Annual Allowance (currently £8,500)) so all of the chargeable gain will be subject to tax. And, of course, amy investments jointly held personally with a spouse can avail of the £8,500 TWICE on disposal.
Dop you really want to throw away a possible tax free allowance worth £17,000?
If and when the company disposes with the investments, it will generate a Capital Gain within the company which will also be subject to Capital Gains Tax. Although companies usually pay Corporation Tax at rates lower than personal Income Tax rates, they do not receive the CGT Annual Allowance (currently £8,500)) so all of the chargeable gain will be subject to tax. And, of course, amy investments jointly held personally with a spouse can avail of the £8,500 TWICE on disposal.
Dop you really want to throw away a possible tax free allowance worth £17,000?
What I do is have a cash balance figure which I don't go below - which is enough capital to run the business and allow me to sleep at night. My accountant does a four month cash-flow forecast and I look at the lowest point. Whatever that is above the minimum figure I take out of the business by way of bonus. In my case, my Tax adivisor assures me it's 2% more Tax efficient to pay a bonus rather than Dividend. Not that I understand the maths myself, and I can't be arsed to figure it out (doubtless Eric could explain it!)
Whether a bonus or a dividend is the most tax efficient way to extract your money depends entirely on your personal tax situation and the rate of Corporation Tax applying to the company's profits.
For smaller companies with relatively low profits, dividends tend to be more tax effective. For larger companies with higher profits, there is not that much to chose between either.
Most of my clients are relatively small so dividends are often the best option for them - as long as the company is in a position to pay dividends and they pay attention to the regulations regarding dividend payments.
Company taxation rules are changing (again) on 1 April 2006 so every situation will have to be reviewed in the light of these changes.
Once the money has been extracted legitimately from the company (whether by salary bonus, dividend or some other method), you are free to do with the money as you see fit.
>> Edited by Eric Mc on Saturday 25th February 08:16
For smaller companies with relatively low profits, dividends tend to be more tax effective. For larger companies with higher profits, there is not that much to chose between either.
Most of my clients are relatively small so dividends are often the best option for them - as long as the company is in a position to pay dividends and they pay attention to the regulations regarding dividend payments.
Company taxation rules are changing (again) on 1 April 2006 so every situation will have to be reviewed in the light of these changes.
Once the money has been extracted legitimately from the company (whether by salary bonus, dividend or some other method), you are free to do with the money as you see fit.
>> Edited by Eric Mc on Saturday 25th February 08:16
Not everybody is "expansionist" when it comes to business matters. Many people just want to use their business as ameans to providing them with a decent living - the more decent the better 
There is nothing wrong with that, it is entirely down to the personality of the business owner.
Expanding a business comes with all its own problems and pitfalls and should only really be embarked upon if it is really, really what you want to do.
>> Edited by Eric Mc on Saturday 25th February 08:43
There is nothing wrong with that, it is entirely down to the personality of the business owner. Expanding a business comes with all its own problems and pitfalls and should only really be embarked upon if it is really, really what you want to do.
>> Edited by Eric Mc on Saturday 25th February 08:43
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