Moving cash between companies

[ds666]

Whilst I will ask the accountants on Monday , once I get something in my head ...

I own a couple of ltd companies with a business partner . We will probably have some excess cash soon . My business partner wants cash ( via dividends ) . I'd rather use what's due to me to buy some BTL's through a new ltd co .

How do I get the "cash" due to me into New Co which I will own 100% from our Holding company without tax implications ie I don't want to take dividends and then re-invest in Newco .

Hope that makes sense ?

[trickywoo]

Intra company dividends are tax free for the receiving company but they have to be entitled to the dividend. Normally this would be a holding company.

I.e. the holding company would own the shares of Company A, B, C etc. Who could then pay it dividends from profits after tax. The controlling person would then own the shares of the holding company.

Not sure if this is what your setup is or not.

You won’t be able to pay dividends directly to an unrelated company.

[ds666]

That is the current structure . But I’d like to have a linked company where I own 100% .

[anonymous-user]

If you own 100%, I wouldn't have thought it would be linked to the other companies?

Could you waive your dividend and use the reserved cash to loan to your new company?

[db10]

Don’t think that achieves his objective as his business partner is entitled to his share of the receivable of the loan.

I would suggest doing a share for share exchange into your new limited company (so your 100% company owns your shares in your joint company) the dividend is then due to your newco which can then use the cash to buy property etc

You should also get substantial shareholding’s exemption if you sell the shares in your joint company in the future.

[anonymous-user]

db10 said:

Don’t think that achieves his objective as his business partner is entitled to his share of the receivable of the loan.

True, but the OPs owned co still gets to use the joint co to fund the start up. The risk in the newco then remains with the joint co rather than him personally (as if the newco fails, it is not just his loss alone).

Would the newco be able to share exchange at par? Would it trigger a personal liability? What is the oar value? What is the value in the joint co?

Haha, genuinely asking questions, don't know the answers.

Last venture I was involved in, we joined our ltd co with another ltd co and formed a new holding topco to sit own both. Topco exchanged share for share and all the original shareholders from each ended up with appropriate share in topco. On that occasion there wasnt any material personal liability. Not sure in the OPs case.

[Countdown]

db10 said:

Don’t think that achieves his objective as his business partner is entitled to his share of the receivable of the loan.

I would suggest doing a share for share exchange into your new limited company (so your 100% company owns your shares in your joint company) the dividend is then due to your newco which can then use the cash to buy property etc

You should also get substantial shareholding’s exemption if you sell the shares in your joint company in the future.

Wouldn't the dividend to the parent company be taxable in the parent company's books?

[db10]

The transfer of shares in the joint co to the newco would be tax free under s.135 tcga1992

Dividends received by companies are not taxable

I’m a tax partner in a big 4 accounting firm

[anonymous-user]

Ha, what do you know?

[Countdown]

db10 said:

The transfer of shares in the joint co to the newco would be tax free under s.135 tcga1992

Dividends received by companies are not taxable

I’m a tax partner in a big 4 accounting firm

Thanks