• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

Personal Holding Company

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    Personal Holding Company

    6.Rather than pay tax on money drawn from the company to invest, consider forming a Personal Holding Company to receive the money tax-free and to make the investments
    12 ways IT contractors can pay less tax :: Contractor UK

    What is a personal holding company ? Anyone using it currently?

    #2
    If you have a second company that holds shares in your current company then you could pay dividends into that company, and there's no tax charge on them. The money is then effectively moved into that second company, and you can use it to make investments.

    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).
    ContractorUK Best Forum Adviser 2013

    Comment


      #3
      Surely, the knock on positive effect of a personal holding company, is that when you have finished with that company (is your 5 year investment bonds have matured), you can possibly close it down and only pay entrepreneurs relief @ 10%??

      Comment


        #4
        Originally posted by morphman View Post
        Surely, the knock on positive effect of a personal holding company, is that when you have finished with that company (is your 5 year investment bonds have matured), you can possibly close it down and only pay entrepreneurs relief @ 10%??
        Hi Morphman

        To be eligible for entrepreneurs relief you have to, amongst other criteria, have held shares in a trading company. If you purely hold investments in a holding company it is likely to be classed as an investment company and as such entrepreneurs relief would not be available.

        Martin

        Comment


          #5
          I guess it's worth it if you're thinking of holding a property portfolio and/or shares. My understanding is that if you hold them inside your normal Ltd you run the risk of it being reclassified as an investment company rather than a real trading company.

          I guess it would be worth it if you were holding a couple of properties and their combined income was under the VAT threshold?
          And the lord said unto John; "come forth and receive eternal life." But John came fifth and won a toaster.

          Comment


            #6
            Originally posted by b0redom View Post
            I guess it's worth it if you're thinking of holding a property portfolio and/or shares. My understanding is that if you hold them inside your normal Ltd you run the risk of it being reclassified as an investment company rather than a real trading company.

            I guess it would be worth it if you were holding a couple of properties and their combined income was under the VAT threshold?
            If you have rental property that you're getting income from then it's worth thinking about, as under the flat rate VAT scheme you'd have to pay VAT on the income even though you can't charge it to the tenants. It can be slightly complicated though, so worth discussing with your accountant if it applies to you.
            ContractorUK Best Forum Adviser 2013

            Comment


              #7
              Eh? Is the holding company not classed as a separate entity for accounting purposes?

              I'd have thought that you'd need a LOT of properties to be pulling down 73k / year (new VAT threshold).

              To be honest, if I were I'd probably retire!
              And the lord said unto John; "come forth and receive eternal life." But John came fifth and won a toaster.

              Comment


                #8
                Originally posted by b0redom View Post
                Eh? Is the holding company not classed as a separate entity for accounting purposes?

                I'd have thought that you'd need a LOT of properties to be pulling down 73k / year (new VAT threshold).

                To be honest, if I were I'd probably retire!
                No, what I mean is that if you own a property through your contracting company, and you're flat rate registered, you have to pay flat rate on the rental income you receive. If you're thinking of buying property you may therefore want to discuss other options with your accountant.
                ContractorUK Best Forum Adviser 2013

                Comment


                  #9
                  Ah sure, so it's either pull out the money from your Ltd, pay your tax, and own it personally or spin up a holding company transfer money tax free into the new company and own it inside there.

                  Obviously it requires some number crunching, but it would seem to me that the latter is probably more sensible, especially in terms of buying more stuff quickly as you defer your tax payment?

                  Am I missing something? Is money transferred by buying an asset in a holding company classed as profit or something?
                  Last edited by b0redom; 22 September 2011, 08:43.
                  And the lord said unto John; "come forth and receive eternal life." But John came fifth and won a toaster.

                  Comment


                    #10
                    Originally posted by b0redom View Post
                    Ah sure, so it's either pull out the money from your Ltd, pay your tax, and own it personally or spin up a holding company transfer money tax free into the new company and own it inside there.

                    Obviously it requires some number crunching, but it would seem to me that the latter is probably more sensible, especially in terms of buying more stuff quickly as you defer your tax payment?

                    Am I missing something? Is money transferred by buying an asset in a holding company classed as profit or something?
                    But it can get complicated as I said - if you're looking at a second company then you'd need to fully check out the rules for VAT flat rate and associated companies, and check out what effect, if any, it would have on you. More details here:

                    HM Revenue & Customs

                    Transferring money from one company to another won't effect your CT in either company.
                    ContractorUK Best Forum Adviser 2013

                    Comment

                    Working...
                    X