Ltd purchasing shares of another Ltd
Ltd purchasing shares of another Ltd
Author
Discussion

PurpleMoonlight

Original Poster:

22,362 posts

188 months

Wednesday 18th May 2016
quotequote all
I own 100% of A Ltd.

I own 50% of B Ltd.

I have agreed to purchase the remaining 50% of B Ltd.

I was going to do this personally but it just occurred to me that A Ltd could purchase all 100% of B Ltd.

Both companies are in profit.

Both companies have the same Directors.

B Ltd does not pay dividends, remuneration is via PAYE.

Turnover of A Ltd is ten times that of B Ltd.

A Ltd is VAT registered, B Ltd is not.


Are there any adverse consequences of this?

Personally I draw £7200 PAYE from each company as no NI. Would this be affected in any way?

Does there need to be a formal valuation of B Ltd if purchased by A Ltd?


I happen to be having lunch with my accountant today so will discuss with him but thought an opinion from you guys couldn't hurt.



Edited by PurpleMoonlight on Wednesday 18th May 04:56


Edited by PurpleMoonlight on Wednesday 18th May 05:07

Eric Mc

125,802 posts

296 months

Wednesday 18th May 2016
quotequote all
More complicated company disclosure requirements.

More complicated Corporation Tax rules.

Possibly he need to prepare consolidated group accounts

Consequently, higher accounting and professional fees.

PurpleMoonlight

Original Poster:

22,362 posts

188 months

Wednesday 18th May 2016
quotequote all
Thanks Eric.

My accountant will be pleased then.

Eric Mc

125,802 posts

296 months

Wednesday 18th May 2016
quotequote all
Not necessarily. I refuse to have anything to do with group account structures. They are way too time consuming and usually over the top for smaller businesses.

KevinCamaroSS

13,858 posts

311 months

Wednesday 18th May 2016
quotequote all
IIRC there used to be something about VAT groups as well, specifically to prevent multiple companies under single ownership all being under the VAT threshold.

dartissimus

954 posts

205 months

Wednesday 18th May 2016
quotequote all
I thought that the way forward was to have a holding company owning all the shares in the other companies, so profits are passed upwards and to have only one set of shares that distribute.

Also the benefits of ringfencing, for example a building.

Much of this type of stuff is done (in my own experience) to accommodate the tax rules that apply at the time, and you can end up with some very convoluted setups that were arranged for irrelevant historical situations.

Eric Mc

125,802 posts

296 months

Wednesday 18th May 2016
quotequote all
And watch out for all the new rules that have just come in in about maintaining details of and reporting Personals of Significant Control (PSCs) That would become extremely complex when there are multiple companies involved.

PurpleMoonlight

Original Poster:

22,362 posts

188 months

Wednesday 18th May 2016
quotequote all
The only possible issue my accountant can see is that HMRC may seek to link both PAYE salaries for NI purposes.

I can easily reduce them if needs be.

Jockman

18,414 posts

191 months

Wednesday 18th May 2016
quotequote all
Vat and Corp Tax linked too?

PurpleMoonlight

Original Poster:

22,362 posts

188 months

Wednesday 18th May 2016
quotequote all
Jockman said:
Vat and Corp Tax linked too?
VAT no he says.

Corporation tax doesn't make any difference for my turnover.

Eric Mc

125,802 posts

296 months

Wednesday 18th May 2016
quotequote all
What did the accountant say about the other matters?

PurpleMoonlight

Original Poster:

22,362 posts

188 months

Wednesday 18th May 2016
quotequote all
Eric Mc said:
What did the accountant say about the other matters?
He didn't say my accounts would cost me more.

I just asked of there were any problems other than the three questions I specifically raised and he said no.

Eric Mc

125,802 posts

296 months

Wednesday 18th May 2016
quotequote all
PurpleMoonlight said:
Eric Mc said:
What did the accountant say about the other matters?
He didn't say my accounts would cost me more.

I just asked of there were any problems other than the three questions I specifically raised and he said no.
So he didn't address the other points - just ignored them.

PurpleMoonlight

Original Poster:

22,362 posts

188 months

Wednesday 18th May 2016
quotequote all
Eric Mc said:
So he didn't address the other points - just ignored them.
Maybe he doesn't consider them a problem they way you do.

They have over 1000 clients so likely are used to group structures.


DavidY

4,492 posts

315 months

Wednesday 18th May 2016
quotequote all
In my experience the overheads of running two small companies, not just in financial terms but in your time as well (do not under estimate this), far outweighs any small savings made here and there, and if you ever have an HMRC inspection they will expect to see ever expense (inc phone bills, etc) apportioned correctly to the correct company. For instance if your mobile is through the VAT registered company, you can claim the VAT back, but they will expect to see an invoice to the other company for the correct amount of calls + VAT, they will also expect to see that it has been paid and not just ';written off'/lost/etc.......

Unless there is a really good reason, I would put all your eggs in one basket, and just have one company.

Yes your accountancy bill may not change Company X bill is £XXX, and company Y bill £YYY, but one slightly larger companies bill may well be less than £XXX+£YYY

Jockman

18,414 posts

191 months

Wednesday 18th May 2016
quotequote all
Does Company A trade with Company B?

Eric Mc

125,802 posts

296 months

Wednesday 18th May 2016
quotequote all
DavidY said:
In my experience the overheads of running two small companies, not just in financial terms but in your time as well (do not under estimate this), far outweighs any small savings made here and there, and if you ever have an HMRC inspection they will expect to see ever expense (inc phone bills, etc) apportioned correctly to the correct company. For instance if your mobile is through the VAT registered company, you can claim the VAT back, but they will expect to see an invoice to the other company for the correct amount of calls + VAT, they will also expect to see that it has been paid and not just ';written off'/lost/etc.......

Unless there is a really good reason, I would put all your eggs in one basket, and just have one company.

Yes your accountancy bill may not change Company X bill is £XXX, and company Y bill £YYY, but one slightly larger companies bill may well be less than £XXX+£YYY
100% my experience too.

PurpleMoonlight

Original Poster:

22,362 posts

188 months

Wednesday 18th May 2016
quotequote all
Jockman said:
Does Company A trade with Company B?
No, not as such.

B uses A's office and equipment but A does not charge for that.

A does not use anything of B's as it has nothing.

PurpleMoonlight

Original Poster:

22,362 posts

188 months

Wednesday 18th May 2016
quotequote all
DavidY said:
Unless there is a really good reason, I would put all your eggs in one basket, and just have one company.
That would then mean VAT on B's fees which it doesn't have to charge at the moment.

DavidY

4,492 posts

315 months

Wednesday 18th May 2016
quotequote all
PurpleMoonlight said:
That would then mean VAT on B's fees which it doesn't have to charge at the moment.
PurpleMoonlight said:
B uses A's office and equipment but A does not charge for that.
So you are claiming all the VAT back on office expenses in company A, for which company B has benefit of, and that company B does not charge VAT on it's invoices.

I think you should have a strong word with yourself regarding the rights and wrongs of misrepresentation defrauding the VAT man.

It sounds like you are having your cake and eating it, hey Mr Customer are you VAT registered, oh yes then I'll invoice you through company A, oh you're not don't worry if I invoice you through company B then you won't get charged VAT, but that's ok as I'm claiming back all the VAT expenses incurred through my other company.

I might have got the wrong end of the stick here, but you certainly haven't explained things very clearly (or have you)