Originally posted by CompulsiveArsonist
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Previously on "Side project using the money from my limited company"
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I'm sort of going through this at the moment. I have a meeting booked with my accountant so I can let you know what happened.
I have a contractingco. I want to start a retail business on the side. I am only putting the capital in, I won't be doing the day to day running.
My accountant has suggested that I set up the new business using personal funds, or to loan the money from contractingco to newco.
Newco needs to have a lease for the shop, buy stock and equipment etc. I wanted to save on Corporation Tax and use some of the earnings of the contractingco.
Suggestions are that contractingco can pay newco for some service (e.g. advertising) thus potentially reducing CT but otherwise there isn't a lot that can be saved. A better idea is that you get friends or family that are higher rate taxpayers to invest in your newco in return for shares under the EIS scheme. Your friends / family will get tax benefits.
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Originally posted by LondonManc View PostThat's not a problem with SJD at all, totally incorrect.
SJD are spot on in this; if you ask the correct questions, you get correct answers. I asked them about funding a separate company and they said yes, so long as it is the same type of work. That is, I couldn't start a holiday home business or coffee shop with money directly from IT contracting.
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Originally posted by GillsMan View PostHope that it helps. It's a rarity for an OP to come here with a particular view and actually listen to opinions to the contrary. Thumbs up for that! Good luck with the additional venture as well.
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Originally posted by GillsMan View PostYou could if that money had been extracted to you personally (and any taxes owed paid). What you can't do is just move money from one entity to another without sorting the tax where due. I get that you know this; I'm just clarifying for anyone else reading.
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Originally posted by LondonManc View PostThat's not a problem with SJD at all, totally incorrect.
SJD are spot on in this; if you ask the correct questions, you get correct answers. I asked them about funding a separate company and they said yes, so long as it is the same type of work. That is, I couldn't start a holiday home business or coffee shop with money directly from IT contracting.
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Originally posted by Mid90 View PostIt make sense, but in this way I'm not going to be able to use the small capital that I have in the current LTD
Thanks for your advise
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Originally posted by TestMangler View PostAnd there is your problem right there.
They are a contractor accountant and not interested in anything other than the contractors formulaic business.
SJD are spot on in this; if you ask the correct questions, you get correct answers. I asked them about funding a separate company and they said yes, so long as it is the same type of work. That is, I couldn't start a holiday home business or coffee shop with money directly from IT contracting.
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Originally posted by Mid90 View PostHi, thanks for your reply.
The question is vague on purpose. I'm just asking if I can invest the money earned with my daily job, in another business using the same LTD.
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Originally posted by DaveB View PostOk, if you are on the VAT Flat Rate Scheme (you almost certainly will be) then by changing the nature of the business in this way you will change the class of business. You can't (I believe) have two different business types with different VAT rates on the same FRS registration. Being on the FRS is also not ideal when you will be buying stock that you will need to pay VAT on as you wont be able to reclaim it under the FRS rules.
You need to either come off the FRS and deal with VAT normally or start a new company specifically for the new business. This may also have the affect oif changing how HMRC treats your contracting Ltd Co. as it may decide it;s primary business is no longer software engineering but trading in jewelry.
There is nothing stopping your current company investing in the new one to get it started. It also has the advantage that you can continue to draw dividends from the current company without the risk that losses from the new business will wipe out any profits that you would normally take this way.
I am not an accountant. You need to have a proper conversation with yours and establish just why they are saying what they are saying.
The initial investment will be spent on advertisement.
Yes, I need to talk better with my accountant...
thanks
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Originally posted by GillsMan View PostThen SJD are probably correct in what they say. It's fine for companies to diversify, but on companies house, you need to specify your nature of business. You can select more than one category, but since different products/services can attract different tax rates, it's advisable to create two separate companies to handle the disparate services you are proposing.
Since costume jewellery and software development are very different, it doesn't make sense to handle both under the same company. You could in theory have a holding company that owns both, but SJD have probably come to the conclusion that it doesn't make sense to do this in your situation.
You'll therefore need a different company for your new venture.
Thanks for your advise
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Originally posted by Mid90 View PostIt will be mostly "costume jewellery"
You need to either come off the FRS and deal with VAT normally or start a new company specifically for the new business. This may also have the affect oif changing how HMRC treats your contracting Ltd Co. as it may decide it;s primary business is no longer software engineering but trading in jewelry.
There is nothing stopping your current company investing in the new one to get it started. It also has the advantage that you can continue to draw dividends from the current company without the risk that losses from the new business will wipe out any profits that you would normally take this way.
I am not an accountant. You need to have a proper conversation with yours and establish just why they are saying what they are saying.
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Originally posted by Mid90 View PostIt will be mostly "costume jewellery"
Since costume jewellery and software development are very different, it doesn't make sense to handle both under the same company. You could in theory have a holding company that owns both, but SJD have probably come to the conclusion that it doesn't make sense to do this in your situation.
You'll therefore need a different company for your new venture.
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