Share trading account for Ltd company?

[willendure]

I have some spare cash sitting in my contracting Ltd, after putting some into a pension SIPP, and I would like to buy some lower risk financial assets with it (gold, shorter bonds, etc.) that remain within the companies balance sheet. Is it simple to set up a trading account for an Ltd? Any recommendations on which broker to go with? Any other things I should be aware of when doing this?

[jamesbrown]

Plenty of threads on this. The general rule is that it isn’t worth it, after accounting for tax and the risk of being classified as a CIHC (which has various implications, including for capital distributions on winding up). On the whole, it is better to distribute the profits and invest personally. There may be some exceptions, but that is the overview. If you do want to proceed, there are few companies that provide trading accounts to corporates, but Interactive Investor is one of them and one of the better platforms in general. You can expect the fees to be higher than a SIPP/personal trading account.

[CheeseSlice]

Invest Engine is much much cheaper than II if you just want ETFs, trackers and not interested in individual stocks.
II has an awful site for companies and many features are broken due to being a bodged version of the personal site.
There are also many fixed rate savings bonds available to companies at the moment without the need to open an investment account.
If you’re not ready to cash out your LTD but are keeping warchest cash in a business bank account earning 0% then these are better options.

[willendure]

The general rule is that it isn’t worth it, after accounting for tax and the risk of being classified as a CIHC.

Seems unlikely that it would end up being classified as a CIHC since it is an actively trading company.

On the tax, I take the money out and pay 33% dividend tax on it, then invest it and pay 20% CGT on the gains. If it stays inside the company its max 25% Corp tax on the gains, on small company rate I expect to be somewhere between the 19% and 25%? Or am I completely wrong?

As CheeseSlice suggests, I'm mostly looking to do some cautious investing of funds that are otherwise sitting dormant in a business account, and business savings accounts are hardly offering much juice either.

[TheGreenBastard]

Seems unlikely that it would end up being classified as a CIHC since it is an actively trading company.

On the tax, I take the money out and pay 33% dividend tax on it, then invest it and pay 20% CGT on the gains. If it stays inside the company its max 25% Corp tax on the gains, on small company rate I expect to be somewhere between the 19% and 25%? Or am I completely wrong?

As CheeseSlice suggests, I'm mostly looking to do some cautious investing of funds that are otherwise sitting dormant in a business account, and business savings accounts are hardly offering much juice either.

You're right, there's a near zero chance for a business with unrelated income being classified as a CIHC just because it invests some of its cash reserves. I'm astounded it's mentioned every time someone asks a similar question, but remember people on this forum operate as "businesses" simply for tax advantages, as evidenced here real business decisions are rarely a concern.

I use ii; trades are a similar cost to the personal account (including a free trade each calendar month), it's the monthly account fee which will sting if you're not investing much.

[jamesbrown]

Seems unlikely that it would end up being classified as a CIHC since it is an actively trading company.

On the tax, I take the money out and pay 33% dividend tax on it, then invest it and pay 20% CGT on the gains. If it stays inside the company its max 25% Corp tax on the gains, on small company rate I expect to be somewhere between the 19% and 25%? Or am I completely wrong?

As CheeseSlice suggests, I'm mostly looking to do some cautious investing of funds that are otherwise sitting dormant in a business account, and business savings accounts are hardly offering much juice either.

It depends on the facts. However, you can safely ignore TGB on this and many other matters. Guidance here:

https://www.gov.uk/hmrc-internal-man...anual/ctm60700

The guidance is constructively vague. Practically speaking, if you have a majority of income from investments or a majority of assets invested (although some argue much less than 50%) or your business is letting properties to connected people, there is a risk of being classified as a CIHC.

Until recently, this was a non-issue unless planning to MVL in future, but a CIHC will not receive small profits relief and will instead pay the full rate of CT on all profit post April 2023. If your business is actively trading (including letting to unconnected people/companies) and a small fraction of the profit originates from a small fraction of assets under investment, the risk should be low. The main gotcha is when you are not actively trading within an accounting period but still hold significant investments as a company that was not a CIHC can become one for a given accounting period.

[jamesbrown]

On the tax, I take the money out and pay 33% dividend tax on it, then invest it and pay 20% CGT on the gains. If it stays inside the company its max 25% Corp tax on the gains, on small company rate I expect to be somewhere between the 19% and 25%? Or am I completely wrong?

You will presumably want to extract that profit at some point, regardless of how it originated, so a fair comparison would require tax on dividends received regardless of origin (of the profit). If you want to MVL in future and receive a capital distribution, it is obviously important that your company has not been a CIHC. Depending of the level of capital gain, there may or may not be CGT to pay on gains made personally (although the CGT annual allowance has been slashed).

[TheGreenBastard]

The guidance is constructively vague. Practically speaking, if you have a majority of income from investments or a majority of assets invested (although some argue much less than 50%) or your business is letting properties to connected people, there is a risk of being classified as a CIHC.

Yeah ignore me and instead take an hypothetical instead of the literal reality you have explained you business operates. Going forward it's a consideration for MVL, but with all known facts CIHC is a non-concern.

The guidance is vague because of case law.

[jamesbrown]

Yeah ignore me and instead take an hypothetical instead of the literal reality you have explained you business operates. Going forward it's a consideration for MVL, but with all known facts CIHC is a non-concern.

The guidance is vague because of case law.

If you had a point, it was lost in your terrible English. You’re probably very agitated, but try to relax .

The guidance is vague because the actual legislation is constructively vague, much like the TAAR. The words “wholly or mainly” are lifted directly from the legislation.

https://www.legislation.gov.uk/ukpga/2010/4/section/18N

[WTFH]

Yeah ignore me and instead take an hypothetical instead of the literal reality you have explained you business operates. Going forward it's a consideration for MVL, but with all known facts CIHC is a non-concern.

The guidance is vague because of case law.

Do you think it's a worthwhile idea to split your businesses up, maybe having a separate one for IT, one for property, etc, or just keep them all as one company?