Is it legal to invest the LTD company money earmarked for corporation tax in stocks?

[NCOTBAC]

Not something I'm actually planning to do, but I was getting a business savings account to put the corporation tax money in and I started thinking about what else it would be possible to do with the money.

Even though its not a good idea?

[softwaredever]

I am sure it is not illegal, per se. In the same way if you mismanage your funds in any other way, it would not be illegal.

There is nothing legislative to say that CT funds have to be earmarked within a company's financial year. Only that it, the CT, is paid within nine months of the end of the last company financial year end.

Don't you need to have enough cash in the company to pay corporation tax at the point you pay a dividend though? It's my understanding that you can't pay a dividend that would leave the company with less cash than its tax liabilities at this date. Perhaps I'm wrong though.

[softwaredever]

So how much benefit are you expecting to get from a few thousand pounds of shares for around a year when the profits (share values can down as well as up etc) are taxed as income as well?

Not illegal to do it but as others say when you make a loss and can't pay your CT you'll be in a world of trouble.

Not something I'm actually planning to do, but I was getting a business savings account to put the corporation tax money in and I started thinking about what else it would be possible to do with the money.

[Jessica@WhiteFieldTax]

Even then, aren't there issues about a closed company owning shares - a different tax regime or something? I know it's been discussed here before. Many times.

Investment company status. If OP is just investing on the side it won’t be an issue. Becomes an issue when it significant.

[NCOTBAC]

So how much benefit are you expecting to get from a few thousand pounds of shares for around a year when the profits (share values can down as well as up etc) are taxed as income as well?

Not illegal to do it but as others say when you make a loss and can't pay your CT you'll be in a world of trouble.

[NotAllThere]

Even then, aren't there issues about a closed company owning shares - a different tax regime or something? I know it's been discussed here before. Many times.

[Jessica@WhiteFieldTax]

Legal yes *1

Advisable no

*1 legal until the day you have to pay your tax. If you can’t as the funds are tied up in stocks, then the company cannot pay its debts as they fall due, and a whole raft of Company Law and Insolvency Law offences open up.

[simes]

I am sure it is not illegal, per se. In the same way if you mismanage your funds in any other way, it would not be illegal.

There is nothing legislative to say that CT funds have to be earmarked within a company's financial year. Only that it, the CT, is paid within nine months of the end of the last company financial year end.

[softwaredever]

Note I'm not asking whether it would be advisable! I know it would not be advisable. But I'm curious about whether it's legal. Say I have a few thousand in my business bank account earmarked for corporation tax. I.e. it's not surplus cash as such, that's already been taken out as dividends. If the business were to invest this money in stocks would it still be legal?