Holding Company

[Big Dawg]

The IT Contractor market is not what it used to be. Everything seems to be blanketed inside IR35 meaning you need to earn a lot more on a day rate to make it worthwhile otherwise may as well go perm! It is a good time to look at diversifying and having multiple sources of income. The 2 obvious ones are Stock Market & Real Estate.

I have a good amount of money in my IT consultancy LTD company and was thinking of setting an Holding Company solely owned by me, with the investment coming from my IT consultancy LTD company. I am just in my research phase at the moment. But hope to have something setup by the next few months.

Does anyone have any advise or recommendations that they can offer me.

Thanks

[Maslins]

Disclosure - I may be deemed biased on this, but...

If your situation is:
- got a Ltd Co with loads of cash in it,
- only able to secure inside IR35/PAYE roles,
then isn't a better solution an MVL (Members Voluntary Liquidation)?

Get that company's cash out into your personal hands, tax efficiently. You can then invest as you see fit. Yes you'll need to avoid setting up a new contracting company for >2 years, but from your comments this seems a minor concern.

Have you got any reasons to NOT do the above? To me seems more sensible than complicating things with a group company structure.

[northernladuk]

Disclosure - I may be deemed biased on this, but...

If your situation is:
- got a Ltd Co with loads of cash in it,
- only able to secure inside IR35/PAYE roles,
then isn't a better solution an MVL (Members Voluntary Liquidation)?

Get that company's cash out into your personal hands, tax efficiently. You can then invest as you see fit. Yes you'll need to avoid setting up a new contracting company for >2 years, but from your comments this seems a minor concern.

Have you got any reasons to NOT do the above? To me seems more sensible than complicating things with a group company structure.

He didn't say he is only able to secure inside gigs. He says everything seems to be blanketed inside IR35 whic isn't quite true. Many are yes, but there are enough outside gigs out there to plan your business around them. He's got to try work out the tax situation if he shut it via MVL and brollied for two years or if he carried on and managed to get one, two maybe three outside gigs in the same period.

That said if he's got that much cash then messing about on what if's might be not be worth it. Get the lump sum out, enjoy it and suffer two years with a brolly. If he misses the benefit of a couple of outside gigs then so be it. Sounds like he's not exactly poor so you could be right.

Just need to factor in the fact that there are outside gigs out there so the 2 year issue 'could' be worth thinking about.

[TheGreenBastard]

Disclosure - I may be deemed biased on this, but...

If your situation is:
- got a Ltd Co with loads of cash in it,
- only able to secure inside IR35/PAYE roles,
then isn't a better solution an MVL (Members Voluntary Liquidation)?

Get that company's cash out into your personal hands, tax efficiently. You can then invest as you see fit. Yes you'll need to avoid setting up a new contracting company for >2 years, but from your comments this seems a minor concern.

Have you got any reasons to NOT do the above? To me seems more sensible than complicating things with a group company structure.

Thinking long term (inheritance tax etc.) then it doesn't seem like a bad idea, especially if aspiring to create a Ltd. dealing with real estate.

MVL'ing due to IR35 has shown to be short-termism around these parts. And for a bunch of "business owners" the advice is always so quick to get it in your personal hands to spunk on an holiday, the height of business acumen!

Big Dawg, what I do for BTL is basically a loan to a real estate SPV; this is classed as "layering" though, which some lenders don't accept, but there are options in the form of Aldermore and Kent Reliance that will lend to these company structures. Now might not be the best time, I foresee asset depreciation in the short term and debt is costly, my strategy is to sit on the sidelines, see if there's a correction and buy more.

[dingdong]

Keeping the money in a holding company or turning your company into an investment company means you'll pay ongoing admin fees, corporation tax on capital gains, and you'll then be taxed when you extract any dividends. You'll also put any future BADR claim at risk if you become more of an investment company than a trading company, and if the current HMRC targeting of limited companies using MSC legislation expands many people will wish they had already closed their companies down.

Extracting via MVL means you can then gradually move the money into ISAs / other tax sheltered savings and then benefit from untaxed capital growth and dividends.

Property may be different but I can't see the attraction of turning your limited company into a stock marketing investing company.

[Big Dawg]

Sorry for my delay in getting back you all I been away in Dubai and I am slowly catching up on bits. Thank you all for taking your time out with your advise. I will try reply to each point

Maslins replied
10 February 2023, 13:08
Disclosure - I may be deemed biased on this, but...

If your situation is:
- got a Ltd Co with loads of cash in it,
- only able to secure inside IR35/PAYE roles,
then isn't a better solution an MVL (Members Voluntary Liquidation)?

Get that company's cash out into your personal hands, tax efficiently. You can then invest as you see fit. Yes you'll need to avoid setting up a new contracting company for >2 years, but from your comments this seems a minor concern.

Have you got any reasons to NOT do the above? To me seems more sensible than complicating things with a group company structure.

Maslins - Up until end of Dec I was working in an outside IR35 role, for an european based client. It looks like my next contract will be inside IR35 with a bank in london. TBH, I haven't looked at MVL yet... I was just speaking to a property investor friend of mind and he had mentioned one of IT consultant friends set up a Holding company for his property investment using funds from his LTD company to finance his investments.

northernladuk - I have a seen a few outside IR35, lets see what the next gig is

TheGreenBastard Thanks some very valid points there. Whilst real estate may dip on the ST, it will always on average go up. If the numbers of a deal add-up even with the higher interest rate I think it be worth the investment. This is part of my LT strategy to move away from IT Consultancy and more into Real Estates, BTL, Flips etc. I want to have a higher % reliability on Passive Income within 5 years.

[gisp]

For property investment you can just convert your existing company to property investment company and use the existing funds.
I am not sure about stock investment.

If you want to go MVL it will cost you. The liquidator charges, I have seen figures of £3000. There's also the 2 year rule.

And a question for the knowledgeable: if one opens a new LTD before MVL the old one, what stops them to work with the new LTD if need be?

[TheGreenBastard]

For property investment you can just convert your existing company to property investment company and use the existing funds.
I am not sure about stock investment.

If you want to go MVL it will cost you. The liquidator charges, I have seen figures of £3000. There's also the 2 year rule.

And a question for the knowledgeable: if one opens a new LTD before MVL the old one, what stops them to work with the new LTD if need be?

The issue is unless you buy property for cash then it's the demands of the lenders who dictate company structures, for example they will likely require a brand new SPV or and existing purely SPV for real estate. Unless you're big they won't touch the risk of providing financing to a repurposed Ltd. with risk due to history.

[gisp]

The issue is unless you buy property for cash then it's the demands of the lenders who dictate company structures, for example they will likely require a brand new SPV or and existing purely SPV for real estate. Unless you're big they won't touch the risk of providing financing to a repurposed Ltd. with risk due to history.

True.
however from experience: some lenders will work with repurposed ltd. The difference between the best offer interest with brand new spv and my offer was 0.3%.
So entirely doable. And saved me £xx xxx in taxes, fees and charges with the MVL route.