Basic ltd company questions
Discussion
I have some basic business questions about private limited companies if people on here could kindly assist.
1)If a company starts off with two directors (who will also be shareholders), can more directors be added in the future?
2)Can further shareholders be added in the future?
3)Does it matter what price the initial shares issued are as they’ll primarily exist to distribute dividends?
4)If I receive a dividend, I’ll be in the 32.5% taxation category. I take it this requires self-assessment to declare?
5)Dividend tax-rate thresholds are after ‘personal allowance’ – what is personal allowance? Is that the £8105 amount that is tax free?
6)In terms of expenses, when can VAT be claimed back on these? For example, paying 20% turnover to a creditor to host a business. Can VAT be claimed back on this?
Thanks for your time, i'll probably have some follow-up questions.
1)If a company starts off with two directors (who will also be shareholders), can more directors be added in the future?
2)Can further shareholders be added in the future?
3)Does it matter what price the initial shares issued are as they’ll primarily exist to distribute dividends?
4)If I receive a dividend, I’ll be in the 32.5% taxation category. I take it this requires self-assessment to declare?
5)Dividend tax-rate thresholds are after ‘personal allowance’ – what is personal allowance? Is that the £8105 amount that is tax free?
6)In terms of expenses, when can VAT be claimed back on these? For example, paying 20% turnover to a creditor to host a business. Can VAT be claimed back on this?
Thanks for your time, i'll probably have some follow-up questions.
PurpleMoonlight said:
5. No, you cannot use your personal allowance against dividend income.
You can use your personal allowance against dividends, but if you're director/shareholder then you'd be better taking a salary up to the personal allowance - this is assuming that you have no other income?I do have other income and it's just a couple of thousand off the 40% bracket. My employer takes care of all tax / PAYE etc so I currently don't do any self-assessment. I'm guessing my future dividends will be taxed at 10% for a couple of thousand then 38% and the personal allowance will be irrelevant.
TrackdayHero said:
hat does it mean when it when it states "Tax rate applied after deduction of Personal Allowance and any Blind Person's Allowance" in the dividend tax rate table here?
You need to look at the bottom of the page you linked to. You will see:Can you claim the tax credit if you don't normally pay tax?
No. You can't claim the 10 per cent tax credit, even if your taxable income is less than your Personal Allowance and you don't pay tax. This is because Income Tax hasn't been deducted from the dividend paid to you - you have simply been given a 10 per cent credit against any Income Tax due.
The heading in the table is misleading (or downright wrong if you like!).
Still, it doesn't directly affect you anyway as you have PAYE income elsewhere that will use the 0% tax personal allowance.
TrackdayHero said:
I have some basic business questions about private limited companies if people on here could kindly assist.
1)If a company starts off with two directors (who will also be shareholders), can more directors be added in the future?
YES. THERE ARE NO UPPER LIMITS TO THE NUMBER OF DIRECTORS THAT CAN BE APPOINTED.
2)Can further shareholders be added in the future?
YES. THERE ARE NO UPPER LIMITS TO THE NUMBER OF SHAREHOLDER THAT CAN BE APPOINTED.
3)Does it matter what price the initial shares issued are as they’ll primarily exist to distribute dividends?
NO. IF A NEW SHAREHOLDER IS HAPPY TO PAY (SAY)£5 PER SHARE FOR A £1 SHARE, THAT'S UP TO THEM. THE SURPLUS VALUE PAID IS ALLOCATED TO A "SHARE PREMIUM ACCOUNT".
4)If I receive a dividend, I’ll be in the 32.5% taxation category. I take it this requires self-assessment to declare?
IF YOU HAVE ADDITIONAL TAX LIABILITIES ARISING THAT CANNOT BE TAXED CORRECTLY AT SOURCE THROUGH (SAY) PAYE OR THROUGH DEDUCTION BY A BANK, THEN YES, SELF ASSESSMENT IS THE RECOGNISED WAY TO DECLARE THIS INCOME.
I ALWAYS WORK ON THE ASSUMPTION THAT ANYONE WHO RUNS THEIR OWN LIMITED COMPANY AND PAYS THEMSELVES THROUGH A COMBINATION OF SALARY/DIVIDENDS/EXPENSE CLAIMS ETC, REALLY DO NEED TO REGISTER FOR SELF ASSESSMENT.
5)Dividend tax-rate thresholds are after ‘personal allowance’ – what is personal allowance? Is that the £8105 amount that is tax free?
DIVIDENDS ARE SUBJECT TO PERSONAL INCOME TAX, JUST LIKE ANY OTHER TYPE OF INCOME. HOWEVER, THE WAY THE TAX IS CALCULATED IS A BIT ODD.
EXAMPLE
DIVIDEND ACTUALLY PAID TO SHAREHOLDER - £10,000
THIS IS LOOKED ON AS BEING "NET OF TAX".
THE TAX CREDIT ATTACHED TO DIVIDENDS IS SET AT 10% OF THE GROSS DIVIDEND VALUE.
THEREFORE A NET DIVIDEND OF £10,000 IS DEEMED TO BE A GROSS DIVIDEND OF £11,111 LESS A TAX CREDIT OF £1.111.
WHEN A PERSON IS ADDING TOGETHER THEIR PERSONAL INCOME FOR TAX PURPOSES, THEY WOULD LOOK AT TEH GROSS DIVIDEND AMOUNT NOT THE NET.
SO - IF A PERSON HAD A GROSS SALARY OF (SAY) £40,000 AND TOOK A DIVIDEND FROM THEIR COMPANY OF £10,000, THE GROSS INCOME THAT WOULD BE TAKEN INTO ACCOUNT IN TEH TAX CALCULATION WOULD BE £51,111 (SALARY £40,000 - DIVIDEND £11,111)
OFFSETTING THE PERSONAL TAX ALLOWANCE OF £8,105 LEAVES GROSS TAXABLE INCOME OF £43,006.
THIS WOULD LEAVE £531 TAXABLE AT THE HIGHER RATE.
BECAUSE IT WAS DIVIDEND THAT PITCHED THE INCOME INTO THE HIGHER RATE TAX BRACKET, THE £531 WOULD BE TAXED, NOT AT 40%, BUT AT 32.5% - WHICH IS THE HIGHER RATE OPF TAX APPLIED TO DIVIDENDS.
6)In terms of expenses, when can VAT be claimed back on these? For example, paying 20% turnover to a creditor to host a business. Can VAT be claimed back on this?
IF IT'S A BUSINESS RELATED AND THERE IS VAT CHARGED BY THE SUPPLIER, YOUR COMPANY CAN CLAIM IT BACK.
THERE CAN BE SOME TYPES OF COSTS WHICH, EVEN IF THEY ARE BUSINESS RELATED, CAN HAVE THE RECLAIM OF TEH VAT BLOCKED OR RESTRICTED. AN EXAMPLE WOULD BE CERTAIN CLASSES OF ENTERTAINING. SO, YOUI DO NEED TO BE AWARE OF THE CIRCUMSTANCES WHERE VAT RECOVERY MAY NOT BE POSSIBLE.
Thanks for your time, i'll probably have some follow-up questions.
Sorry for the block capitals. I thought it was the easiest way to show my answers.1)If a company starts off with two directors (who will also be shareholders), can more directors be added in the future?
YES. THERE ARE NO UPPER LIMITS TO THE NUMBER OF DIRECTORS THAT CAN BE APPOINTED.
2)Can further shareholders be added in the future?
YES. THERE ARE NO UPPER LIMITS TO THE NUMBER OF SHAREHOLDER THAT CAN BE APPOINTED.
3)Does it matter what price the initial shares issued are as they’ll primarily exist to distribute dividends?
NO. IF A NEW SHAREHOLDER IS HAPPY TO PAY (SAY)£5 PER SHARE FOR A £1 SHARE, THAT'S UP TO THEM. THE SURPLUS VALUE PAID IS ALLOCATED TO A "SHARE PREMIUM ACCOUNT".
4)If I receive a dividend, I’ll be in the 32.5% taxation category. I take it this requires self-assessment to declare?
IF YOU HAVE ADDITIONAL TAX LIABILITIES ARISING THAT CANNOT BE TAXED CORRECTLY AT SOURCE THROUGH (SAY) PAYE OR THROUGH DEDUCTION BY A BANK, THEN YES, SELF ASSESSMENT IS THE RECOGNISED WAY TO DECLARE THIS INCOME.
I ALWAYS WORK ON THE ASSUMPTION THAT ANYONE WHO RUNS THEIR OWN LIMITED COMPANY AND PAYS THEMSELVES THROUGH A COMBINATION OF SALARY/DIVIDENDS/EXPENSE CLAIMS ETC, REALLY DO NEED TO REGISTER FOR SELF ASSESSMENT.
5)Dividend tax-rate thresholds are after ‘personal allowance’ – what is personal allowance? Is that the £8105 amount that is tax free?
DIVIDENDS ARE SUBJECT TO PERSONAL INCOME TAX, JUST LIKE ANY OTHER TYPE OF INCOME. HOWEVER, THE WAY THE TAX IS CALCULATED IS A BIT ODD.
EXAMPLE
DIVIDEND ACTUALLY PAID TO SHAREHOLDER - £10,000
THIS IS LOOKED ON AS BEING "NET OF TAX".
THE TAX CREDIT ATTACHED TO DIVIDENDS IS SET AT 10% OF THE GROSS DIVIDEND VALUE.
THEREFORE A NET DIVIDEND OF £10,000 IS DEEMED TO BE A GROSS DIVIDEND OF £11,111 LESS A TAX CREDIT OF £1.111.
WHEN A PERSON IS ADDING TOGETHER THEIR PERSONAL INCOME FOR TAX PURPOSES, THEY WOULD LOOK AT TEH GROSS DIVIDEND AMOUNT NOT THE NET.
SO - IF A PERSON HAD A GROSS SALARY OF (SAY) £40,000 AND TOOK A DIVIDEND FROM THEIR COMPANY OF £10,000, THE GROSS INCOME THAT WOULD BE TAKEN INTO ACCOUNT IN TEH TAX CALCULATION WOULD BE £51,111 (SALARY £40,000 - DIVIDEND £11,111)
OFFSETTING THE PERSONAL TAX ALLOWANCE OF £8,105 LEAVES GROSS TAXABLE INCOME OF £43,006.
THIS WOULD LEAVE £531 TAXABLE AT THE HIGHER RATE.
BECAUSE IT WAS DIVIDEND THAT PITCHED THE INCOME INTO THE HIGHER RATE TAX BRACKET, THE £531 WOULD BE TAXED, NOT AT 40%, BUT AT 32.5% - WHICH IS THE HIGHER RATE OPF TAX APPLIED TO DIVIDENDS.
6)In terms of expenses, when can VAT be claimed back on these? For example, paying 20% turnover to a creditor to host a business. Can VAT be claimed back on this?
IF IT'S A BUSINESS RELATED AND THERE IS VAT CHARGED BY THE SUPPLIER, YOUR COMPANY CAN CLAIM IT BACK.
THERE CAN BE SOME TYPES OF COSTS WHICH, EVEN IF THEY ARE BUSINESS RELATED, CAN HAVE THE RECLAIM OF TEH VAT BLOCKED OR RESTRICTED. AN EXAMPLE WOULD BE CERTAIN CLASSES OF ENTERTAINING. SO, YOUI DO NEED TO BE AWARE OF THE CIRCUMSTANCES WHERE VAT RECOVERY MAY NOT BE POSSIBLE.
Thanks for your time, i'll probably have some follow-up questions.
Edited by Eric Mc on Sunday 9th December 09:13
Thanks for the answers guys.
This isn't relevant to us, but I've been reading what I can online to learn as much as possible. If I had a company that was going to engage in a regulated activity as defined by the FSA, does an individual's FSA licence easy slot into another company.
Say X, Y and Z are setting up a new limited company, X is authorised to do whatever, what position would X have to take to allow that limited company FSA authorisation? Would X need to be a director?
This isn't relevant to us, but I've been reading what I can online to learn as much as possible. If I had a company that was going to engage in a regulated activity as defined by the FSA, does an individual's FSA licence easy slot into another company.
Say X, Y and Z are setting up a new limited company, X is authorised to do whatever, what position would X have to take to allow that limited company FSA authorisation? Would X need to be a director?
And he's back...
I have an old car I will be using for a mixture of private and business use. It's waft-tastic, old E39 528i. It's worth around 1k. I want to off-load some expenses of running it to the company.
1) If I sell it to the company for 1k are there any tax implications for me?
2) The car benefit charge £320 (I'll make no employee capital contribution or employee payments made towards private use). Is this a one off payment?
3) How would servicing and road licence work? Would the company pay this as a normal expense (and reclaim the VAT from the former)?
4) A registered keeper doesn't have to be the owner of the car, can that apply here? I.e. the company be the owner by I remain the RK?
5) Can a company pay for private insurance or will the company need its own policy?
6) The benefit in kind for the company paying for fuel with the level of C02 is large so I'll continue to pay private fuel myself. I need to look into claiming for business fuel and the best way to benefit from that.
Thanks in anticipation.
I have an old car I will be using for a mixture of private and business use. It's waft-tastic, old E39 528i. It's worth around 1k. I want to off-load some expenses of running it to the company.
1) If I sell it to the company for 1k are there any tax implications for me?
2) The car benefit charge £320 (I'll make no employee capital contribution or employee payments made towards private use). Is this a one off payment?
3) How would servicing and road licence work? Would the company pay this as a normal expense (and reclaim the VAT from the former)?
4) A registered keeper doesn't have to be the owner of the car, can that apply here? I.e. the company be the owner by I remain the RK?
5) Can a company pay for private insurance or will the company need its own policy?
6) The benefit in kind for the company paying for fuel with the level of C02 is large so I'll continue to pay private fuel myself. I need to look into claiming for business fuel and the best way to benefit from that.
Thanks in anticipation.
TrackdayHero said:
And he's back...
I have an old car I will be using for a mixture of private and business use. It's waft-tastic, old E39 528i. It's worth around 1k. I want to off-load some expenses of running it to the company.
1) If I sell it to the company for 1k are there any tax implications for me?
2) The car benefit charge £320 (I'll make no employee capital contribution or employee payments made towards private use). Is this a one off payment?
3) How would servicing and road licence work? Would the company pay this as a normal expense (and reclaim the VAT from the former)?
4) A registered keeper doesn't have to be the owner of the car, can that apply here? I.e. the company be the owner by I remain the RK?
5) Can a company pay for private insurance or will the company need its own policy?
6) The benefit in kind for the company paying for fuel with the level of C02 is large so I'll continue to pay private fuel myself. I need to look into claiming for business fuel and the best way to benefit from that.
Thanks in anticipation.
Wy not just pay yourself 45p mile for business use , google it for more info far similar!I have an old car I will be using for a mixture of private and business use. It's waft-tastic, old E39 528i. It's worth around 1k. I want to off-load some expenses of running it to the company.
1) If I sell it to the company for 1k are there any tax implications for me?
2) The car benefit charge £320 (I'll make no employee capital contribution or employee payments made towards private use). Is this a one off payment?
3) How would servicing and road licence work? Would the company pay this as a normal expense (and reclaim the VAT from the former)?
4) A registered keeper doesn't have to be the owner of the car, can that apply here? I.e. the company be the owner by I remain the RK?
5) Can a company pay for private insurance or will the company need its own policy?
6) The benefit in kind for the company paying for fuel with the level of C02 is large so I'll continue to pay private fuel myself. I need to look into claiming for business fuel and the best way to benefit from that.
Thanks in anticipation.
Agreed - unless the car is "special" in that it complies with certain "green" criteria, the esasiest and cheapest way to deal with a motor car that has mixed personal and business use when operating through a limited company is to keep the car in private hands and charge the allowed mileage rate claim of 45p per mile to the company.
(The rate drops to 25p per mile after 10,000 business related miles).
(The rate drops to 25p per mile after 10,000 business related miles).
The business mileage will be quite limited. It's primarily internet based with the occasional travelling. The 'perks', if you like, will be having the others areas as described paid for by the company.
If it is retained privately, can these still be paid for i.e. the servicing, insurance, tax etc?
If it is retained privately, can these still be paid for i.e. the servicing, insurance, tax etc?
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