Can a company invest in a FTSE tracker?
Discussion
I've had a quick look online but there's no obvious quick answer to this so I'm asking in case anyone has any direct experience in doing this, or indeed good advice as to alternatives or who best to use?
I've had a personal Vanguard FTSE100 tracker for a few years which I've been paying a modest amount into each month which has done okay. However I have far more money in my business account (ltd company) that's just sat earning nothing at all, so it makes sense to start a similar investment scheme and start putting company money into that as well (my idea would be to 'drip' it in via regular amounts every month). It's got to be better than letting it erode via inflation. I appreciate that any money made is 'company money', so subject to the usual taxes etc when removed.
So I wonder whether anyone knows whether it is possible for a company to invest its capital in this way? And if so, what would be a good company to use? I'd rather avoid Vanguard simply because I already have a reasonable sum with them. Makes sense not to have all eggs in one basket.
Ideally I'd like to build it up to a level where eventually I can scale back active work and (hopefully) have company invested money funding my salary, as a sort of pension.
Appreciate any thoughts.
I've had a personal Vanguard FTSE100 tracker for a few years which I've been paying a modest amount into each month which has done okay. However I have far more money in my business account (ltd company) that's just sat earning nothing at all, so it makes sense to start a similar investment scheme and start putting company money into that as well (my idea would be to 'drip' it in via regular amounts every month). It's got to be better than letting it erode via inflation. I appreciate that any money made is 'company money', so subject to the usual taxes etc when removed.
So I wonder whether anyone knows whether it is possible for a company to invest its capital in this way? And if so, what would be a good company to use? I'd rather avoid Vanguard simply because I already have a reasonable sum with them. Makes sense not to have all eggs in one basket.
Ideally I'd like to build it up to a level where eventually I can scale back active work and (hopefully) have company invested money funding my salary, as a sort of pension.
Appreciate any thoughts.
It'll be interesting to see other replies here and I am not an accountant...
Everything you want to do is possible. I was advised to transfer funds to a second company before investing otherwise your main company becomes an investment company rather than a trading company. Not sure of all the repercussions of that but one is certainly no entrepreneurs relief.
I'm intending to do the above and then let the capital grow and use it to supplement a pension in later life (or as soon as I can!).
Only some firms will let you trade as a company. HL used to but I think they have stopped. ii do let you I think and also seem to have low charges.
Everything you want to do is possible. I was advised to transfer funds to a second company before investing otherwise your main company becomes an investment company rather than a trading company. Not sure of all the repercussions of that but one is certainly no entrepreneurs relief.
I'm intending to do the above and then let the capital grow and use it to supplement a pension in later life (or as soon as I can!).
Only some firms will let you trade as a company. HL used to but I think they have stopped. ii do let you I think and also seem to have low charges.
HL used to certainly allow biz accounts, as I still have mine, but unsure if they still do. It looks and behaves exactly like my personal account.
I wouldn't personally give the trading company stuff much thought. Seems highly unlikely you will make significantly more profit from the tracker, than you would the business. If you are at risk of this to the extent it might jeopardise ER, you likely have much more urgent problems to talk to your accountant about.
I wouldn't personally give the trading company stuff much thought. Seems highly unlikely you will make significantly more profit from the tracker, than you would the business. If you are at risk of this to the extent it might jeopardise ER, you likely have much more urgent problems to talk to your accountant about.
Edited by lizardbrain on Thursday 28th July 14:14
lizardbrain said:
Of course. Only issue is finding a broker that allows company accounts. HL used to certainly, as still have mine, but unsure if they still do.
I wouldn't personally give the trading company stuff much thought. Seems highly unlikely you will make significantly more profit from the tracker, than you would the business. If you are at risk of this to the extent it might jeopardise ER, you likely have much more urgent problems to deal with.
I'm sorry, you've lost me completely with this. Could you give me the idiot's version? I wouldn't personally give the trading company stuff much thought. Seems highly unlikely you will make significantly more profit from the tracker, than you would the business. If you are at risk of this to the extent it might jeopardise ER, you likely have much more urgent problems to deal with.
Edited by lizardbrain on Thursday 28th July 14:12
Ari said:
I'm sorry, you've lost me completely with this. Could you give me the idiot's version?
I should have made clear I'm no expert, and interested to hear expert opinions....but the way it was explained to me, is that a company starts to look like an investment company if a substantial portion of revenue comes from investments, perhaps substantial meaning something like 20%.
To give example figures, if you make 10% pa returns on 500k cash invested, then that is 50k per year. if that 50k is > 20`% of revenue, that would mean the company starts to look a bit like an investment company.
However it's kept deliberately vague. HMRC may also look at stuff like, what proportion of staff resources is allocated to investment, which is likely to be very low with a passive tracker.
Another issue with long term planning, is you run into problems drawing salary and dividend from a dormant company without actively traded revenue.
And of course the rules around this and ER etc can change meaning it's difficult to plan far ahead. Rishi is already making noises about changing the rules to encourage investment of company funds, if he gets in.
Basically, it's no silver bullet. Paying into a SIPP or even an ISA may be sensible alternatives.
Edited by lizardbrain on Thursday 28th July 14:37
Ah, that makes sense, as does your original post now I understand the point you're making.
Yes, certainly in the short to medium term (I hope!) 'normal' income will far outweigh investment income. Long term it would be nice to scale back 'normal' income and hopefully have built up a decent investment income, so that might be a different matter then, but that's a long way into the future.
Yes, certainly in the short to medium term (I hope!) 'normal' income will far outweigh investment income. Long term it would be nice to scale back 'normal' income and hopefully have built up a decent investment income, so that might be a different matter then, but that's a long way into the future.
Company accounts with HL are a 'suspended service' at the moment, with no information on when or even whether they will be available again, according to the lady I spoke to there a moment ago.
Seems a bit odd. I'm sure they must have a good reason but I can't imagine what it would be.
So, in principle it seems such things exist, but not with HL.
Any other suggestions?
Seems a bit odd. I'm sure they must have a good reason but I can't imagine what it would be.
So, in principle it seems such things exist, but not with HL.
Any other suggestions?
Interactive investor do it I think. After that its trying them all like AJ Bell etc.
If it's all in one company and you are running it long term you won't be able to access Entrepreneurs Relief - as you cant fold the company whilst money is invested. That misses you £1mill at 10%......
If it's all in one company and you are running it long term you won't be able to access Entrepreneurs Relief - as you cant fold the company whilst money is invested. That misses you £1mill at 10%......
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