Has anyone come across Touchstone before?
I was approached by them with the following proposition...
Most directors pay themselves via salary and dividends, resulting in high corporation and dividend tax bills, with no funds being used to benefit the future trade of their business.
We at Touchstone Business Development have shown numerous companies how to use their profit to potentially benefit the future trade of their business, without the need for any funds to go offshore, whilst simultaneously reducing their Corporation Tax liability.
The Business Development model was grounded in the Companies Act.
Chapter 10, section 172 part (c) states:
“A director of a company must act in the way he/she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—
(c)the need to foster the company's business relationships with suppliers, customers and others”
As a result, since 1925 (Atherton v British & Helsby Cables Limited 10 TC 155) to the present, HMRC and the Courts have accepted that cash contributions to Business Trusts which are in principle made “wholly and exclusively” for the purposes of improving the trade of the business, are accepted as deductible against the taxable profits of the contributing company.
As such, a formal relationship can be created between your Ltd Company and an established Business Development Trust by signing a legal document called a Deed of Adherence. As the Director of your Ltd Company you will be asked by the Trust to name a number of clients and suppliers that are contributing to the success of your Company. These companies can therefore be named as potential beneficiaries on the Trust Deed.
The Trust has full discretion over any asset/funds received and can choose to make payments to any named beneficiaries. As the potential beneficiaries are clients and suppliers of your company it is reasonable to suggest that the money your Ltd Company has contributed into the trust has been done so “wholly and exclusively” for the purposes of improving the trade of the business – which is exactly what the Companies Act compels you as director to do.
As a hypothetical example, a company that could be contributing to your Company’s success could be your agency or client – they pay you after all. Therefore, they could be named as one of the potential beneficiaries. If the agency/client at some stage in the future receives a cash bonus from the Trust, is it more likely or less likely that the agency/client would look upon you and your Company favourably when it comes to awarding future contracts or increased day rates?
The answer is obvious and this method of benefitting trade has been successfully used by tens of thousands of UK Companies for decades.
Any funds that your Ltd Company contributes to a Trust are treated exactly the same as any other business expense whereby the expense will reduce the profit of the company meaning no corporation tax is due on that amount. The amount contributed to Trust is denoted as an Administrative Expense on the company tax return in an open and transparent fashion with HMRC as has been the case for decades.