Personal Holding Company

[mickael28]

There's no reason you can't make those same investments from your current company though, unless you're worried that they form a significant part of your income and there's a danger of the company being seen as an investment company (which would then be subject to a higher rate of CT).

I think that in the last few years the CT rates have been converging, is there any benefit in investing the surplus retained in your trading company diretly there rather than creating another Investment company?

If you pass the money to the new company, could it be claimable by HMRC under a possible IR35 investigation? or is it totally safe with the new structure?

[Martin at NixonWilliams]

I think that in the last few years the CT rates have been converging, is there any benefit in investing the surplus retained in your trading company diretly there rather than creating another Investment company?

If you pass the money to the new company, could it be claimable by HMRC under a possible IR35 investigation? or is it totally safe with the new structure?

The higher rate of CT is not worth worrying about now, it is only 1% higher and is expected to be 20% across the board very soon. The main benefit of using the same company is for simplicity, and the saving made in accountancy fees etc. but there are other issues involved with having an associated company, such as your ability to use the flat rate scheme and the effect it has on your corporation tax bands (again, less important nowadays).

I am unsure what your second question is, but if the trading company was found to be caught by IR35 it would need to find the cash to make the tax and NI payments it owes. If money has been loaned to the investment company, it would need to be recovered unless the funds can be raised another way.

I hope this helps.

Martin

[mickael28]

I am unsure what your second question is, but if the trading company was found to be caught by IR35 it would need to find the cash to make the tax and NI payments it owes. If money has been loaned to the investment company, it would need to be recovered unless the funds can be raised another way.

Thanks Martin. I was reading an article from InTouch about how to use the surplus in a ltd company and they said:

Protecting Investments or surplus funds and ring fencing

Operating as a contractor is generally considered to carry low commercial risk, but you should always be aware of:

1. Any uninsured business risks for negligence - avoidable by taking out adequate professional indemnity
insurance, and

2. Claims made under IR35 by HM Revenue & Customs (HMRC) - a measurable risk with the help of a specialist contractor accountant

If you believe these risks remain in your business, you should consider protecting your retained profits, and any subsequent investments that are made with the money.
This can be achieved in various ways, but a common solution involves creating a separate company (owned by you) that holds a special class of shares in your main company.
Surplus income could be declared as a dividend to the new company via the special shares. The new company does not have to pay tax on the dividends received and, once received, the funds belong to the new company.
Generally, the money held by the new company is then free of any commercial risk that existed in your contracting company. Caution and advice is recommended and the overall value of the investments being protected needs to be sufficient to make the extra effort worthwhile.

So I was understanding the sentence "the money held by the new company is then free of any commercial risk that existed in your contracting company", as if the LTD company was not at risk of a possible IR35 claim for the money transferred to the new company, although it seems by reading your post that this would not be the case and the money will need to come back to the Ltd company?

I see that *Clare from InTouch* was in this topic before, if you could please clarify that point?

Further info: http://www.intouchaccounting.com/wp-...urpluscash.pdf