Hi all. I originally set up my company in 2014, and at the time was advised that I could have a company with no employees, take no wages and only pay a dividend to shareholders.
I was told that the reason that I could do this is that I am already a full time employee with a good income (I'm a high rate tax payer), and that I am effectively just running the company as a hobby in my spare time.
In fact my reason for making this a LTD company wasn't anything to do with tax, but, it's because I wanted to separate my person assets from the company so that if someone tries to sue the company for whatever reason (like patent infringements for example) then at least they will never get my house.
The company has had sales of £170,000 over that eight years, and after paying corporation tax the dividends are about £6000 per year split between three people, all of whom register their income on tax returns. Probably our margins aren't really high enough, however the effort of buying parts in, assembling and shipping out isn't great at all, most of the development was done in the early years.
The company is a cottage industry manufacturer and sells an electronic box directly to end customers, and we have over a thousand, so this is not an IT consultancy company or anything like that.
One motive for me asking is that I am thinking of starting another small company on very similar lines (though a very different product) and I am wondering if I can copy/paste the concept. My logic is that neither company needs to actually pay me a wage until such time as I stop working for my normal employer. The other option is to just do this second product within the same existing company. There are pro and cons to that. Is there any rule about running multiple companies as a hobby?
I don't have a tax adviser or even an accountant and have been doing my own accounts and submitted micro entity accounts to Companies House / HMRC every year myself. I have a record of every single transaction going in/out of the company and can prove that it all adds up if I ever needed to, so I don't see any of that being a problem.
I just want to check that the original premise of no employees, no wages, it's just a hobby, I do a tax return, is still valid, especially before I do it again. Thanks.
I was told that the reason that I could do this is that I am already a full time employee with a good income (I'm a high rate tax payer), and that I am effectively just running the company as a hobby in my spare time.
In fact my reason for making this a LTD company wasn't anything to do with tax, but, it's because I wanted to separate my person assets from the company so that if someone tries to sue the company for whatever reason (like patent infringements for example) then at least they will never get my house.
The company has had sales of £170,000 over that eight years, and after paying corporation tax the dividends are about £6000 per year split between three people, all of whom register their income on tax returns. Probably our margins aren't really high enough, however the effort of buying parts in, assembling and shipping out isn't great at all, most of the development was done in the early years.
The company is a cottage industry manufacturer and sells an electronic box directly to end customers, and we have over a thousand, so this is not an IT consultancy company or anything like that.
One motive for me asking is that I am thinking of starting another small company on very similar lines (though a very different product) and I am wondering if I can copy/paste the concept. My logic is that neither company needs to actually pay me a wage until such time as I stop working for my normal employer. The other option is to just do this second product within the same existing company. There are pro and cons to that. Is there any rule about running multiple companies as a hobby?
I don't have a tax adviser or even an accountant and have been doing my own accounts and submitted micro entity accounts to Companies House / HMRC every year myself. I have a record of every single transaction going in/out of the company and can prove that it all adds up if I ever needed to, so I don't see any of that being a problem.
I just want to check that the original premise of no employees, no wages, it's just a hobby, I do a tax return, is still valid, especially before I do it again. Thanks.
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