buying investments via a limited company

[thompsonson]

Hello all,

I'm Matt, just started contracting at the end of July, finding my feet with all the limited company etc... I actually did a 3 month contract 4 years ago but used an umbrella company...

So, i'm looking to invest some money via the company and was hoping to hear from other people that have done this - mainly any info on brokers?

I'm comfortable picking my own investments, actually looking for some ETF's. So far I've had a look at Self Trade, they require a fair amount of information which at the mo I'm finding confusing - like a Board Resolution... shame they don't they know I AM the board and every thing's subject to my whim.. ;-)

So any info (cost, ease of use, level of service experienced etc..) would be appreciated.

Many thanks,
Matt

[Hex]

This might help a bit:

http://boards.fool.co.uk/Message.asp...whole#10741692

It has links to other discussions as well.

[TheFaQQer]

If you invest via your company, then you run the risk of being classed as an investment vehicle, which has different legal and taxation requirements.

[ASB]

Why? Is a question that springs to mind.

Remember any investment made will be out of post tax profits, so unless you have drawn salary.dividends up to the lower rate threshold then you personally can get the money out with no further tax to pay and can inverst it as you see fit.

Your company gets no CGT allowances and any profits or income arising are chargeable as profit.

Here are some links where it has been discussed which might answer your actual questions.

http://forums.contractoruk.com/accou...+company+funds
http://forums.contractoruk.com/accou...+company+funds
http://forums.contractoruk.com/accou...esting+company

[thompsonson]

why...

Thanks for the links.

At present i can happily live off basic wage and drawing down dividends within the basic rate tax bracket.

I already use my ISA as a repayment vehicle for my (interest only) mortgage so the allowance is pretty much used up on that. As such any profit made on personal investments would also be taxable.

So I'm thinking, have the company invest the money I would have personally. Keeping it in the company means i will pay CT on any profit (and write off any losses). Then drip feed it out (relatively tax free) as i do at the moment...

Obviously qualified advice is required but from reading the posts it appears they big thing to avoid is becoming an investment vehicle.

[moorfield]

Why not just lump it all into a pension, and draw 25% tax free when you hit 55 ?

[thompsonson]

I may want it before then - my initial plan was a 5-10 year. one where i'd wind the company up with the taper relief... thanks to our very own Darling that's not going to happen now but i still think it's reasonably sound, as will be 18% CGT instead of 10%...

So that and I'd also be taxed on the other 75% of your pension...

[tim123]

So I'm thinking, have the company invest the money I would have personally. Keeping it in the company means i will pay CT on any profit (and write off any losses). Then drip feed it out (relatively tax free) as i do at the moment...

but you will pay tax on it: CGT inside the company.

tim

[minstrel]

I already use my ISA as a repayment vehicle for my (interest free) mortgage

Interest free mortgage? That sounds awesome - where do I get one of those?

[minstrel]

I may want it before then - my initial plan was a 5-10 year. one where i'd wind the company up with the taper relief... thanks to our very own Darling that's not going to happen now but i still think it's reasonably sound, as will be 18% CGT instead of 10%...

So that and I'd also be taxed on the other 75% of your pension...

Over 5-10 years you may find that it is better to pay the dividend and pay off mortgage capital.

The 18% CGT means that you are only a few percent better off than the dividend route. If your mortgage is 6% and you pay off capital, you are effectively investing at a guaranteed rate of 10% (assuming higher rate tax payer).

Clearly it depends on your attitude to risk and investing skills, but are you confident your investments you make via company would make 10% pa?

You've also got risk of being classed as an investment company (= higher CT) plus the possibility that they change the rules on capital distribution etc. What's the probablility of the tax rules being the same now as they will be in 10 years time? If they raise the CGT rate to 25% in a few years time that would have a big impact.