Reply to: Buying Co. assets - any limitations on what I can buy?

[pmasoft]

Ok, I'll bite.

A sockie is a fake ID created by one of several types of poster:-

Many times perma banned - Pure troll, often thinks it's a funny or clever persona, but 99% of the time that's only the opinion of the sockie maker.
Comedy value ID from a real poster - This is sadly rare, but some exist, take James Tiberius Kirk ID as an example.
Trolling account of a regular poster - Way to protect the main posting account but act like a total dick.

OK thanks for the info.

[TykeMerc]

OK fair enough, guess I just saw it as a query that warranted an explanation. End of the day guess we all want to minimise the tax take.

I have to ask and will probably get shot down for it...what is a sockie?

Ok, I'll bite.

A sockie is a fake ID created by one of several types of poster:-

Many times perma banned - Pure troll, often thinks it's a funny or clever persona, but 99% of the time that's only the opinion of the sockie maker.
Comedy value ID from a real poster - This is sadly rare, but some exist, take James Tiberius Kirk ID as an example.
Trolling account of a regular poster - Way to protect the main posting account but act like a total dick.

[pmasoft]

Sockies asking implausible questions - generally the same question with a slightly different scenario each time - take bandwidth from real posters that have not been able to answer their legitimate questions with a bare minimum of research. So, when the questions are laughable, most around here will shoot first and ask questions later, and that's how it should be (especially if it encourages those that are, shall we say, genuinely challenged, to do a bare minimum of research first).

OK fair enough, guess I just saw it as a query that warranted an explanation. End of the day guess we all want to minimise the tax take.

I have to ask and will probably get shot down for it...what is a sockie?

[jamesbrown]

Hi TykeMerc
appears to me he has not ignored the sensible responses as he thanked all including myself. Obviously I supplied a comprehensive explanation which went beyond the original query, but isn't that what this forum is supposed to be about...helping one another and not just dissing them?

Sockies asking implausible questions - generally the same question with a slightly different scenario each time - take bandwidth from real posters that have not been able to answer their legitimate questions with a bare minimum of research. So, when the questions are laughable, most around here will shoot first and ask questions later, and that's how it should be (especially if it encourages those that are, shall we say, genuinely challenged, to do a bare minimum of research first).

[pmasoft]

Alternative Investment

Hmm, where have we seen this kind of behaviour on the forum before?

A new poster asks a ludicrous question in the professional forums with an absurd scenario and ignores the sensible responses, I'm sure there's a familiar pattern to this.

In the minuscule chance that this is a real poster with a real question (about 1 in a billion on that) the answer is don't be so daft.

Hi TykeMerc
appears to me he has not ignored the sensible responses as he thanked all including myself. Obviously I supplied a comprehensive explanation which went beyond the original query, but isn't that what this forum is supposed to be about...helping one another and not just dissing them?

[ASB]

Provided one is aware of the complications it really is fine. There is a possibility it may be beneficial. The question is simply when the bik exceeds what you would have paid in taxes.

spend 5k on a grand. Not chargeable to ct. Its not an asset used in the business.

Get charged to bik on 20% of the value, plus class 1a ni.

Sometime later sell it. Expected outcome is a loss. Not offsetable. If it did make a profit it would be taxable. Though you could possibly try and argue it was exempt. Pma pointed out the exemption received by chattels.

so you can do exactly what you want. But it is probably pointless

[TykeMerc]

Thanks to all for advice, especially pmasoft.

LeCyclist

Hmm, where have we seen this kind of behaviour on the forum before?

A new poster asks a ludicrous question in the professional forums with an absurd scenario and ignores the sensible responses, I'm sure there's a familiar pattern to this.

In the minuscule chance that this is a real poster with a real question (about 1 in a billion on that) the answer is don't be so daft.

[lecyclist]

Thanks to all for advice, especially pmasoft.

LeCyclist

[tractor]

This is pretty common sense and your specific example will be ludicrously transparent to HMRC. If YourCo purchases an asset and you personally benefit (e.g. by playing the piano), there's a potential BIK. Likewise, you can't buy wine for YourCo and drink it or buy a painting and stick it in your bedroom. Were this piano a legitimate investment for YourCo (yeah, right), YourCo would pay tax on any investment gain and you may also risk identifying YourCo as an investment vehicle (CIHC), depending on the circumstances surrounding those investments.

Don't be a muppet and view YourCo as a mechanism to achieve some thinly veiled personal aims. You have a statutory duty to not run YourCo like a muppet.

Looking back on this forum in the last few weeks this is not a new phenomenon-doo-doo-de-do-doo

[jamesbrown]

This is pretty common sense and your specific example will be ludicrously transparent to HMRC. If YourCo purchases an asset and you personally benefit (e.g. by playing the piano), there's a potential BIK. Likewise, you can't buy wine for YourCo and drink it or buy a painting and stick it in your bedroom. Were this piano a legitimate investment for YourCo (yeah, right), YourCo would pay tax on any investment gain and you may also risk identifying YourCo as an investment vehicle (CIHC), depending on the circumstances surrounding those investments.

Don't be a muppet and view YourCo as a mechanism to achieve some thinly veiled personal aims. You have a statutory duty to not run YourCo like a muppet.

[Scruff]

About twelve years ago, a certain company invested in shares in a classic car. The car wasn't ever driven and was restored and the share was eventually sold by the company and it broke even on its investment...

[northernladuk]

Oh yeah.... And what does your accountant say about all this

[northernladuk]

Question back to you is does your business model actually work? There is a question over tax relief and there will be CT on the profit and then what's left will be taxed when you withdraw it. Does this still seem worth the risk when your returns IF the price goes up are eroded? What profit are your expecting in your pocket at the end? Compare that to a model where you just stick the cash in a higher interest business account like Aldermore or someone.

Don't forget to insure the item as well and possible storage costs if you want to avoid the BiK. You don't need to play the piano for it to incur BiK. It just has to be available. Same argument as a company car sitting on your drive.

Oh yeah and while you own it you can't shut your company down when an opportunity arises and claim the tax benefits that can be had for doing so.

These factors and probably more are the reasons no one else does this. The fact they don't also speaks volumes.

[pmasoft]

Alternative Investments

A grand piano could be a good investment. Older ones have appreciated in value considerably and there is a good global market for these. As do some stamps/wines/art.
However buying via your business may not be the best way in all circumstances. Chattels, like wine, do not attract capital gains tax. Therefore you could be better off investing personally using tax-paid monies. Using company funds would mean a taxable profit upon sale (or set against profits if a loss) and you would incur a personal tax liability on draw-down of any funds as usual. Plus your company does not get a CGT allowance.

Also get advice and research on what to buy: There are several books on Amazon.

The way to potentially make money on wines is buy the better/best wines "en premier". Store them "in bond" to avoid duty and VAT. Once a wine doubles in price sell half of it and reinvest in a new vintage. Worse case scenario for this is you drink great wine for free Best case - Tax free investment.

So my advice is think this through before taking a plunge and if it is likely to make a profit buy personally and if it will lose money use the business.

PS My company used to rent a grand piano for my showroom and it was allowable expense and no asset on the books (just another way to tinkle the ivories)

[Kenny@MyAccountantFriend]

Investment purchases would not reduce your corporation tax liability as they will be held at their value in the accounts.

Tax would be payable on any profit made when sold or tax relief on loses when sold.