Investing company assets in OEICs/Unit Trusts

[dude69]

It is perfectly reasonable to invest the remaining company funds. Provided you are trading you will not get classed as an investment company (or at least are very unlikely to). What you are losing is the CGT allowance. How much of a penalty this is depends on how sucessful you are.

Hmmm. The issue is that if you intend to take advantage of Capital Gains relief, the money is going to be in your company. Therefore you have a choice between ~5%AER on deposit, or more like 8% invested.

The relative merits of personal taxation and its annual CGT allowance (which for a two-person couple is fairly generous - if you make 10% you need to have about £200k in assets outside of your £14k/year to go over allowance) vs. corporate taxation are hence more-or-less irrelevant - you either pay 20% Corporation Tax on 5% or on 8%. I'd rather pay it on 8%.

[tim123]

Hmmm. The issue is that if you intend to take advantage of Capital Gains relief, the money is going to be in your company. Therefore you have a choice between ~5%AER on deposit, or more like 8% invested.

The relative merits of personal taxation and its annual CGT allowance (which for a two-person couple is fairly generous - if you make 10% you need to have about £200k in assets outside of your £14k/year to go over allowance) vs. corporate taxation are hence more-or-less irrelevant - you either pay 20% Corporation Tax on 5% or on 8%. I'd rather pay it on 8%.

But that 8% is a risk based return If you make the wrong decisions it could be 0% or even minus 10%.

tim

[dude69]

But that 8% is a risk based return If you make the wrong decisions it could be 0% or even minus 10%.

tim

That doesn't affect the decision.... You would get CT relief on a 10% loss. There is no tax relief on personal investment losses, unless you are using your CGT allowance.

The average return does not change.

20% one year, 12% the next, -10% the next. It's just investing.

[glashIFA@Paramount]

You can do income drawdown until you are 75, 20 years. About 7% of fund value max if you retire at 55.

You can do income drawdown past 75 - for the rest of your life if you like (AAlternative Secured Pension) There's no requirement to ever purchase an annuity. Of course, the level of income you can "drawdown" after 75 changes and the tax issues on death are quite punative which doesn't make it a great proposition, but there are options.

[glashIFA@Paramount]

Where would you purchase the funds in a companies names?
I'm sure none of the fund supermarkets would allow it so do you have to purchase them direct? If so then you are walloped with a large initial fee of 5% or thereabouts plus no chance of getting your mitts on any renewal commission.

Stick it offshore - gross rollup, off the company books, worry about the potential tax issues when it comes back into the UK. If it doesn't come back to the UK then even better. Use somewhere like the Isle of Man as a "holding bay" and then send the monies where you want - lots of people do this. There's all sorts of trust arrangements that you can use. Not all IFAs are money grabbing, they just want paying for what they do, same as IT contractors / accountants etc. 5% initial and renewal can easily come back to you.

[dude69]

Stick it offshore - gross rollup, off the company books, worry about the potential tax issues when it comes back into the UK. If it doesn't come back to the UK then even better.

So what happens to the money????

[glashIFA@Paramount]

So what happens to the money????

Sorry - what i meant was, if it doesn't come back into the country because you've decided to move abroad for instance and decide to take the money in a different country.

[ASB]

That doesn't affect the decision.... You would get CT relief on a 10% loss.

The rules may have changed but it's not necessarily that simple.

Where you can (potentially) get bitten in the bum is if you realise a loss you must have a profit of a similar 'type' to offset it against. i.e. you can offset it against investment gains but not trading profits.

Obviously you only make a loss at the point of actual sale, during the period the asset has been owned it should have had a book value based upon it's realisable value. The ability to carry forward and back these is fairly strict, thus if you do decide to take a loss on something you might need to take a profit on something else at the same time (or fairly close) in order to benefit from relief.

[IR35 Avoider]

I have some company money invested in a unit trust - can't remember how I got it there, might have sent the UT company a form and a cheque directly.

I think Selftrade now offer company accounts.

[ASB]

Hmmm. The issue is that if you intend to take advantage of Capital Gains relief, the money is going to be in your company. Therefore you have a choice between ~5%AER on deposit, or more like 8% invested.

The figure was exemplary. The point was that you should be able to generate the same return whether the funds are company owned or personal.

What is key is whether you are going to be able to get the cash out as a capital distribution.

Even if you pay higher rate tax on it there is a case to pay enough dividends to ensure you can use your tax free allowances at least.