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Side project using the money from my limited company

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    #11
    Originally posted by Mid90 View Post
    It will be mostly "costume jewellery"
    Ok, if you are on the VAT Flat Rate Scheme (you almost certainly will be) then by changing the nature of the business in this way you will change the class of business. You can't (I believe) have two different business types with different VAT rates on the same FRS registration. Being on the FRS is also not ideal when you will be buying stock that you will need to pay VAT on as you wont be able to reclaim it under the FRS rules.

    You need to either come off the FRS and deal with VAT normally or start a new company specifically for the new business. This may also have the affect oif changing how HMRC treats your contracting Ltd Co. as it may decide it;s primary business is no longer software engineering but trading in jewelry.

    There is nothing stopping your current company investing in the new one to get it started. It also has the advantage that you can continue to draw dividends from the current company without the risk that losses from the new business will wipe out any profits that you would normally take this way.

    I am not an accountant. You need to have a proper conversation with yours and establish just why they are saying what they are saying.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

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      #12
      Originally posted by GillsMan View Post
      Then SJD are probably correct in what they say. It's fine for companies to diversify, but on companies house, you need to specify your nature of business. You can select more than one category, but since different products/services can attract different tax rates, it's advisable to create two separate companies to handle the disparate services you are proposing.

      Since costume jewellery and software development are very different, it doesn't make sense to handle both under the same company. You could in theory have a holding company that owns both, but SJD have probably come to the conclusion that it doesn't make sense to do this in your situation.

      You'll therefore need a different company for your new venture.
      It make sense, but in this way I'm not going to be able to use the small capital that I have in the current LTD
      Thanks for your advise

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        #13
        Originally posted by DaveB View Post
        Ok, if you are on the VAT Flat Rate Scheme (you almost certainly will be) then by changing the nature of the business in this way you will change the class of business. You can't (I believe) have two different business types with different VAT rates on the same FRS registration. Being on the FRS is also not ideal when you will be buying stock that you will need to pay VAT on as you wont be able to reclaim it under the FRS rules.

        You need to either come off the FRS and deal with VAT normally or start a new company specifically for the new business. This may also have the affect oif changing how HMRC treats your contracting Ltd Co. as it may decide it;s primary business is no longer software engineering but trading in jewelry.

        There is nothing stopping your current company investing in the new one to get it started. It also has the advantage that you can continue to draw dividends from the current company without the risk that losses from the new business will wipe out any profits that you would normally take this way.

        I am not an accountant. You need to have a proper conversation with yours and establish just why they are saying what they are saying.
        The business will be, at the start, based just on dropshipping. I will not buy any goods.
        The initial investment will be spent on advertisement.

        Yes, I need to talk better with my accountant...
        thanks

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          #14
          Originally posted by Mid90 View Post
          Hi, thanks for your reply.

          The question is vague on purpose. I'm just asking if I can invest the money earned with my daily job, in another business using the same LTD.
          And as you see from the advice given after the detail has appeared, being vague is very unhelpful in complex situations. Dunno what others though but when you said e-commerce, I thought you meant the IT side, not selling stuff. That was the point I was making earlier.
          'CUK forum personality of 2011 - Winner - Yes really!!!!

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            #15
            Originally posted by TestMangler View Post
            And there is your problem right there.

            They are a contractor accountant and not interested in anything other than the contractors formulaic business.
            That's not a problem with SJD at all, totally incorrect.

            SJD are spot on in this; if you ask the correct questions, you get correct answers. I asked them about funding a separate company and they said yes, so long as it is the same type of work. That is, I couldn't start a holiday home business or coffee shop with money directly from IT contracting.
            The greatest trick the devil ever pulled was convincing the world that he didn't exist

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              #16
              Originally posted by Mid90 View Post
              It make sense, but in this way I'm not going to be able to use the small capital that I have in the current LTD
              Thanks for your advise
              Yes, that's about the sum of it. I can definitely see why it's a shame, but I can also see why it's quite logical from a tax perspective, as if we were allowed to do that, we could just funnel funds (and profit) to non profitable businesses quite easily, thus avoiding coroporation tax owed to HMRC. It's what large organisations do, but if small companies were able to do it, the economy would go bust.

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                #17
                Originally posted by LondonManc View Post
                That's not a problem with SJD at all, totally incorrect.

                SJD are spot on in this; if you ask the correct questions, you get correct answers. I asked them about funding a separate company and they said yes, so long as it is the same type of work. That is, I couldn't start a holiday home business or coffee shop with money directly from IT contracting.
                You could if that money had been extracted to you personally (and any taxes owed paid). What you can't do is just move money from one entity to another without sorting the tax where due. I get that you know this; I'm just clarifying for anyone else reading.

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                  #18
                  Thanks for the great reply

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                    #19
                    Originally posted by GillsMan View Post
                    You could if that money had been extracted to you personally (and any taxes owed paid). What you can't do is just move money from one entity to another without sorting the tax where due. I get that you know this; I'm just clarifying for anyone else reading.
                    Yep, exactly what I was told by SJD.
                    The greatest trick the devil ever pulled was convincing the world that he didn't exist

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                      #20
                      Originally posted by Mid90 View Post
                      Thanks for the great reply
                      Hope that it helps. It's a rarity for an OP to come here with a particular view and actually listen to opinions to the contrary. Thumbs up for that! Good luck with the additional venture as well.

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