Buying shares using my UK LTD

[davieboy]

Hi there folks,

I couldn't find an answer to this so hope you can help.

Got a bit of profit left over in my LTD for the year, rather than pay 20% of it in Corporation tax, I'd like to invest in some FTSE shares.

My question is:

Let's say if I buy 100 shares of company XYZ and then sell them in 1 month.

I've made a profit of 1000 pounds.

Do I need to keep 20% of that for Corporation Tax or can I reinvest the profit and build my portfolio?

Thank you

[syrio]

You'll need to pay corporation tax on the profits.

[TheCyclingProgrammer]

Wouldn't you be investing using your post-tax profit? How would investing in shares reduce your CT bill?

[Waldorf]

You pay Corporation Tax on the profits of your company. After this has been accounted for you can pay the remainder as a dividend or amongst other things oh could invest the funds in shares etc.

Any profit you make you would have to pay tax on at 20%, if you make a loss this can only be offset against profits on the same activity, so you cannot offset any losses against your profits on your consultancy work.

Also speak to your accountant as if you do several trades, this will create a lot of work for them and hence extra costs for you.

[Maslins]

Short answer = don't do it. Take the cash out and invest in shares (if that's what you wish to do) personally, potentially via an ISA. <-- not investment advice, share values can go down as well as up etc etc.

[Jessica@WhiteFieldTax]

Short answer = don't do it. Take the cash out and invest in shares (if that's what you wish to do) personally, potentially via an ISA. <-- not investment advice, share values can go down as well as up etc etc.

Concur

[Waldorf]

Short answer = don't do it. Take the cash out and invest in shares (if that's what you wish to do) personally, potentially via an ISA. <-- not investment advice, share values can go down as well as up etc etc.

I think this depends on the person, if someone has a serious amount of cash and plan to use it as their retirement pot then by leaving the funds in the company you avoid hearty personal tax on the dividends.

Take advice but often accountants advise against this because it can be horrendous to do the accounts if you have investments, certainly if you do lots of buying and selling. If you are not a but and hold person then doing it personally probably makes more sense.

In my experience daily trader types tend to start with a large pot of money and end up with a much smaller pot!

[Jessica@WhiteFieldTax]

I think this depends on the person, if someone has a serious amount of cash and plan to use it as their retirement pot then by leaving the funds in the company you avoid hearty personal tax on the dividends.

Take advice but often accountants advise against this because it can be horrendous to do the accounts if you have investments, certainly if you do lots of buying and selling. If you are not a but and hold person then doing it personally probably makes more sense.

In my experience daily trader types tend to start with a large pot of money and end up with a much smaller pot!

Its not really about the complexity - thats our job The concerns are around mixing investment with trading, asset protection, and deferring some tax now for potentially something much higher if the portfolio grows. Bottom line is most accountants trade via companies, but don't have investments or properties in them.

[ASB]

I think this depends on the person, if someone has a serious amount of cash and plan to use it as their retirement pot then by leaving the funds in the company you avoid hearty personal tax on the dividends.

That is true to a degree. But it is not simple and depends very much on individual circumstances.

Say, for example you are a 40% tax payer as a result of the dividends.

If you took 10k gross dividends then you end up with 7.5k net (changing soon of course).

Invest the 7.5k and it grows @ 5% for 20 years, then you have £20.5k. There will be some capital gains to pay, unless it was ISA'd - assume it was.

Now, in the corporate with the same 5% for 20 years then you would have 26.5k. Whoopie do.

Errrr, no. The gain of 16.5k would be subject to CT since there is no CGT allowance for the co. So this knock it down to 21.2. And you still have to get the money out of the co without suffering any additional tax on it in order to be ahead of the game.

Basically you are only looking at tax deferment. The question then is whether you are going to be in a better position tax wise at the point you want to get you mitts on it.

[this is why the tax relief on pensions is really an illusion, it just comes out at the other end and broadly taxed x growth = untaxed x growth x tax. The tax break on pensions only really comes if you are a lower rate taxpayer when drawing the pension than when you were contributing. It can be the case that the reverse is true, iun which case it is expensive tax wise]

[TheCyclingProgrammer]

What ASB says, plus the risk of jeopardising your ability to claim ER if you wind the company up if you undertake any serious investment activity whilst ceasing to trade.