Investing retained profits

[proster]

That sounds like exactly the kind of thing I was considering..

If your limited company makes a loan to an offshore investment company and pays nominal interest (similar to a deposit on a business current account) then your OIC can make any investment it likes, e.g. property, etc..

The interest your limited company receives from the loan is, of course, taxable.

Any money (profits) you subsequently choose to bring "onshore" from your OIC is also taxable.

Not sure about the legality tho.. anyone?

[Jog On]

My plan is to make the offshore holding company a shareholder of the contracting Ltd so when divis get paid out a percentage go to the offshore investment company. CT has already been paid on the contracting Ltd profits but the offshore investment company is not liable for CT so when the after tax profits go in there's no more tax to be paid on capital gains/rental income/equity/dividends etc.

So I can invest some money made by the Ltd without having to go up to the 28% CT bracket and have my Ltd become an investment company. But have an investment company specifically for that which is offshore and get's its investment capital in the form of after tax profits from my contracting Ltd.

I don't see another way around it, I don't want to put it into a pension fund and I've got an ISA but I intend to invest more than 7k a year. I don't see why I should have to pay higher bracket tax rates just because I want to invest the company profits - offshore it is, and if there are tax breaks involved well that's a bonus!

[proster]

But at some point you'll have to bring that money onshore when you want to spend it.. Assuming you're going to be a high rate tax payer until you retire, you'll be paying high rate tax on this money (income).

However, if this is set up as a loan from your uk ltd company to the OIC, then it remains an asset on the balance sheet.

When winding up your company after 3 years, you are entitled to some tapered tax relief on any value left in the company - which would ultimately be a cheaper way to bring the money onshore.

But I feel there's something still missing..

[IR35 Avoider]

My plan is to make the offshore holding company a shareholder of the contracting Ltd so when divis get paid out a percentage go to the offshore investment company. CT has already been paid on the contracting Ltd profits but the offshore investment company is not liable for CT so when the after tax profits go in there's no more tax to be paid on capital gains/rental income/equity/dividends etc.

So I can invest some money made by the Ltd without having to go up to the 28% CT bracket and have my Ltd become an investment company. But have an investment company specifically for that which is offshore and get's its investment capital in the form of after tax profits from my contracting Ltd.

I don't see another way around it, I don't want to put it into a pension fund and I've got an ISA but I intend to invest more than 7k a year. I don't see why I should have to pay higher bracket tax rates just because I want to invest the company profits - offshore it is, and if there are tax breaks involved well that's a bonus!

What exactly do you mean by off-shore company? I believe that the fact that a company is registered outside the UK is irrelevant in determining how much tax it pays in the UK. Its UK tax bill is determined by whether it has a physical presence here or is controlled from here. As it is your company, it will be controlled from here, so will pay full UK Corporation Tax. (I am not an accountant, and may be talking complete b*ll*cks.)