What can I do with money in my business bank account?

[administrator]

Firstly stop thinking of it as "I have" it's not your money, it's your companies and if you can grasp that I'd use the money to ****

Not acceptable SimonMac, please keep answers courteous and helpful in the professional forums.

[Submariner]

cheers guys, I was thinking like putting it into some higher rate business account (which don't seem to exist) or something to pay a good return (although I know it will all be Company money). The long and short of it is that the money is earning nothing in the business banking account. For example, could I invest the money in stocks and shares on the Company's behalf?

[jamesbrown]

The best you can do is to split the money into chunks required immediately (current account) and chunks that are required on other horizons (e.g. CT, warchest/profits for later use), which can be placed in an easy access savings account (best is about ~1% now) or in fixed-term bonds with appropriate horizons. Just remember the FSCS limits per banking license. Whether it's worth the effort depends on the amounts you're talking about. It's probably worth the effort for 50-100k+, as you can get close to 2% in a 6+ month bond. I'm not sure how the CIC rules may impact other investments in practice, but it's probably not good to have a significant fraction of your income originating from investments; and in case it wasn't obvious, don't invest liabilities (CT etc.).

[Submariner]

thanks James, I'm assuming I can't buy stocks and shares on the Company's behalf then??? say 39K worth of bp or vodafone for example

[jamesbrown]

thanks James, I'm assuming I can't buy stocks and shares on the Company's behalf then??? say 39K worth of bp or vodafone for example

You can certainly do it if you have profits that you're willing to risk. Whether it makes financial sense will depend on a lot of things. For example, as an individual you have a CGT allowance, whereas the company will pay CT on all profits. As NLUK suggested, it generally makes more sense to invest as an individual if you've still got some bandwidth before you hit the higher rate limit. I don't know the specifics of how the CIC rules work when a company starts to make a significant amount from investments vs. the primary trade, but others may offer advice (or you can search). Personally, I'd favor a conservative approach and use only savings accounts/bonds but YMMV. Don't forget pensions too. Probably worth talking to an IFA.

[Martin at NixonWilliams]

thanks James, I'm assuming I can't buy stocks and shares on the Company's behalf then??? say 39K worth of bp or vodafone for example

You can invest the company's money however you like but you must be careful. I would advise against investing money set aside for taxes but if you do, avoid investing in shares and use something with a safe return such as a short term fixed bond.

One thing that has not been mentioned is the effect this might have on your trading company status. If vast amounts of the company's money is being invested you may be seen as an investment company, meaning you could lose out on your eligibility to claim for entrepreneurs relief when you cease to trade.

You could also end up paying a higher rate of Corporation Tax as the 20% rate for small companies does not apply to investment companies.

I hope this helps.

Martin

[ThomserveBAS]

I've looked into this and there are very few low/no risk options for what is essentially (in my case) HMRC's money. I settled for moving a third of the business turnover into an ING (now Barclays) business account which at the time was earning 2% (better than the 0.025 I was earning with HSBC).

This had two distinct advantages;

1) It moved the money out of the business account so I was never tempted to spend it (not that I would ) and
2) It has earned the company a bit of cash (pittance in comparison to my day rate but my business exists to turn a profit and I've turned money the business can't spend into a bit it can)

Shame they've canned the account now - I think options are pretty poor now with 1% being the best deal around

[jmo21]

I've looked into this and there are very few low/no risk options for what is essentially (in my case) HMRC's money. I settled for moving a third of the business turnover into an ING (now Barclays) business account which at the time was earning 2% (better than the 0.025 I was earning with HSBC).

This had two distinct advantages;

1) It moved the money out of the business account so I was never tempted to spend it (not that I would ) and
2) It has earned the company a bit of cash (pittance in comparison to my day rate but my business exists to turn a profit and I've turned money the business can't spend into a bit it can)

Shame they've canned the account now - I think options are pretty poor now with 1% being the best deal around

I got one of those too, I think the 2% rate is only for a year though before it drops down.

It's nice to see a monthly credit that is not invoice money coming in though

[jamesbrown]

One thing that has not been mentioned is the effect this might have on your trading company status.

That's what I meant by the CIC rules. Perhaps you have some advice on the circumstances under which a company's status may be questioned? For example, the proportion of turnover from investments versus the primary trade or the type of investments that risk CIC status.

[Submariner]

OK for discussion sake, say I was to invest around 20% of turnover into stocks and shares? I say invest as I assume this would be different to putting in a higher rate account which seem to get nothing anyway.