Entrepreneurs' Relief

[duducontractor]

er and investing cash in company

hiya
cool - thanks all...
from some quick calculations 28% CT is much more than what i will gain
i was hoping that i could invest for a few years (say3 years) or something,make gains and return to normal...run company for 2 more years and close it down..

thanks
sp

[Clare@InTouch]

In order to qualify for ER the company has to be a trading company for the year preceeding cessation. A trading company is one that is trading (surprise there) and not carrying on other activities to a substantial extent.

Substantial for this purpose means at least 20%.

It does not matter how much time you personally spend on making the investment, so the fact that you give HSBC the money and they invest it isn't important.

[malvolio]

So which bit of my earlier answers did you not understand?

You can do it but you don't get taper relief on CGT when you finally do close down the company and your annual CT rate will be 28%, if Hector decides you are an investment company.

In this context, money in the bank is not an asset, BTW.

HTH

[duducontractor]

er and investing cash in company

thanks guys.let me try to simplify my question

i have about 70K left in my company bank account.i own 65% of the company shares and my partner owns 35%.she is just a company sec.

current bank interest rates give nothing.so we are considering taking some asset based HSBC products which will give around 15-20% returns per annum.

i just wanted to if this will have an adverse effect on ER as and when i decided to wind up my company. my accountant says it might.I am not convinced.
I donot intend to close my company in the next 3-5 years anyway.

the amount i want to invest is more than 20% of my assets ( aka money in bank) , the returns per annum should be less than 20% of profit and i spend no time on this as HSBC is doing the investment for me.

thanks
sp

[Moscow Mule]

No, it's the stock value. Physical assets and goods for sale.

Gotcha.

[malvolio]

No, it's the stock value. Physical assets and goods for sale.

[Moscow Mule]

Being a freelance probably means the stock value is tiny, so he may be in trouble.

How do you value yourco (and hence the value of your shares)?

Is it based on the capital distribution should you wind it up today?

[malvolio]

"What's the point at which my company ceases to be a trading vehicle and becomes an investment one, and so liable to CT at 28% and loses taper relief?" is what he's struggling to say.

In which case the answer is somewhere in here: http://www.hmrc.gov.uk/manuals/CG1manual/CG17953p.htm

but the rule seems to be based on the value of the investment against the stock value of the company. Being a freelance probably means the stock value is tiny, so he may be in trouble.

HTH

[sweetandsour]

hi - i am pulling my hairs out because my accountant says - "we are not FSA registered so we cannot give you advice "

i have some funds in my company,been trading for 3 years nearly.i am thinking of investing in HSBC's asset based portfolio. they take 1% fees upfront and pretty much works like pension. the returns in best case scenario is 15% . my accountant is advising me that i will loose out on ER if i do this ( i.e if this is greater than 20% of assets or profit) i won't spend much time because hsbc is doing all the work.

even if i invest 50K my returns are around 7.5k.. this is roughly 20% of my profit
50K is greater than
can you please give some guidance...?

Sorry dude. I must be dumb.

I still can't work out what your question is.

[duducontractor]

hi - not sure why the first post didnot come out

hi - i am pulling my hairs out because my accountant says - "we are not FSA registered so we cannot give you advice "

i have some funds in my company,been trading for 3 years nearly.i am thinking of investing in HSBC's asset based portfolio. they take 1% fees upfront and pretty much works like pension. the returns in best case scenario is 15% . my accountant is advising me that i will loose out on ER if i do this ( i.e if this is greater than 20% of assets or profit) i won't spend much time because hsbc is doing all the work.

even if i invest 50K my returns are around 7.5k.. this is roughly 20% of my profit
50K is greater than
can you please give some guidance...?

[sweetandsour]

can you please give some guidance...?

You'll have to tell us your question first.

[Clippy]

hi - i am pulling my hairs out because my accountant says - "we are not FSA registered so we cannot give you advice "

i have some funds in my company,been trading for 3 years nearly.i am thinking of investing in HSBC's asset based portfolio. they take 1% fees upfront and pretty much works like pension. the returns in best case scenario is 15% . my accountant is advising me that i will loose out on ER if i do this ( i.e if this is greater than 20% of assets or profit) i won't spend much time because hsbc is doing all the work.

even if i invest 50K my returns are around 7.5k.. this is roughly 20% of my profit
50K is greater than
can you please give some guidance...?

Hello Joey.

[duducontractor]

investment with asset based portfolio

hi - i am pulling my hairs out because my accountant says - "we are not FSA registered so we cannot give you advice "

i have some funds in my company,been trading for 3 years nearly.i am thinking of investing in HSBC's asset based portfolio. they take 1% fees upfront and pretty much works like pension. the returns in best case scenario is 15% . my accountant is advising me that i will loose out on ER if i do this ( i.e if this is greater than 20% of assets or profit) i won't spend much time because hsbc is doing all the work.

even if i invest 50K my returns are around 7.5k.. this is roughly 20% of my profit
50K is greater than
can you please give some guidance...?

[Danbro]

Er

Just looking at SJD

The company must be a trading company or the holding company of a trading group in the 12 months leading up to the date of disposal. The definition of a trading company is based on the activities the company carries on. A trading company is a company which carries on trading activities and to no substantial extent carries on activities other than trading activities.


I dont understand this - I am an IT contractor but all my business cash is invested in goverment bonds through TD Waterhouse as in a business account.

Does this affect my trading status?

Although not really in legislation, HMRC consider a company to be an investment company ( not trading ) if the company has more than 20% in investments. The 20% can be viewed as assets, turnover, management time.

It will be HMRC who would view your company to be trading or not, If you are considered to be an investment company then you would pay 28% corporation tax for example.

If you are due to claim ER in the future then it maybe beneficial to either sell your investments / transfer them into your name, you would need to do this before closing down your company anyway, which you would do to claim ER via the ESC C16 route.

Thanks
Neil

[joey122]

Just looking at SJD


The company must be a trading company or the holding company of a trading group in the 12 months leading up to the date of disposal. The definition of a trading company is based on the activities the company carries on. A trading company is a company which carries on trading activities and to no substantial extent carries on activities other than trading activities.


I dont understand this - I am an IT contractor but all my business cash is invested in goverment bonds through TD Waterhouse as in a business account.

Does this affect my trading status?