rozentas
Suck it and see
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Post by rozentas on Feb 28, 2016 18:42:29 GMT
I have a limited company in the construction industry which employs 3 people, myself, wife and son. I am going to retire soon and so the company will be would up. If I want to invest a large sum in P2P say £300000, my accountant tells me there's no advantage in investing through a company employing the three of us, it's better to split the money equally between the three of us and invest personally. I have a particular circumstance which still makes me want to use a company.
My Son is autistic and will never earn a living himself but can work for me, for which he gets a salary, self esteem etc.....He would very much like to feel he is still working for a company and earning a living.
If I set up another company with £300000 as starting capital to invest in P2P and other things with 3 employees, pay each a salary of £8000, pay capital gains tax if I make any more than £24000, and pay dividends on the remainder, even make pension contributions, I can't see why this would be less advantageous than each of us investing personally but maybe I am missing something?
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SteveT
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Post by SteveT on Feb 28, 2016 18:46:59 GMT
I don't think you're missing anything and I think your accountant should go have a rethink. One important additional benefit is that, if you earn a salary of £8000, you will also receive a full year's National Insurance credit towards a state pension.
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stevio
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Post by stevio on Feb 28, 2016 18:55:15 GMT
Have you considered asking your accountant the reason why he recommends that rather than a public forum?  Your only likely make 30k/yr on 300k with 20% CT on that. If your paying 3x 8k salary, not likely much left for dividends and pension. Company running costs likely around £500-1000/year. No great benefit to investing through company this way. May as well invest personally and make use of 3x personal allowances, so no tax or running costs. Investing through company only really worthwhile if excess funds in company after salaries, dividends and pensions paid. Also if already have company, so already paying running costs |
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ben
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Post by ben on Feb 28, 2016 22:41:21 GMT
Agree that financially would be better investing as individuals, but can see why you want to invest as a company.
How about just investing the majority as individuals and only part for the company, just to keep it going in name only
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adrianc
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Post by adrianc on Feb 29, 2016 8:24:35 GMT
I have a limited company in the construction industry which employs 3 people, myself, wife and son. I am going to retire soon and so the company will be would up. Is the company not viable with only the other two employees?
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ben
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Post by ben on Feb 29, 2016 8:33:09 GMT
I have a limited company in the construction industry which employs 3 people, myself, wife and son. I am going to retire soon and so the company will be would up. Is the company not viable with only the other two employees? Or even just the one employee your son , then can use the tax threshold of yourself and wife.
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stevio
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Post by stevio on Feb 29, 2016 8:56:32 GMT
Unless there is sufficient income coming in above approx 30K, then the costs are more for a company
If want to keep a salary, just use the income from personally investing and pay in monthly amounts and call it 'salary'
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SteveT
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Post by SteveT on Feb 29, 2016 9:44:59 GMT
Unless there is sufficient income coming in above approx 30K, then the costs are more for a companyNot necessarily and it all depends on personal circumstances. Even if one has to pay additional accountancy fees to compile and submit company account and tax return (which may not wholly be the case if an existing company will continue to exist in some form regardless), the value of accruing additional years of NI pension credit can be significant. It currently costs around £750 to "buy" an additional year of NI pension credit and this is expected to rise with the new flat-rate state pension. If 3 employees (who otherwise would no longer be in salaried employment) were paid £8,000 per year (ie. just below the NI Primary Threshold of £8060) then the "value" of their each accruing further years of NI pension credit should be at least £2250 per annum.
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adrianc
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Post by adrianc on Feb 29, 2016 10:05:56 GMT
Is the company not viable with only the other two employees? Or even just the one employee your son , then can use the tax threshold of yourself and wife. I've just noticed the line about the son's autism. Apologies, OP.
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duck
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Post by duck on Feb 29, 2016 13:01:18 GMT
What I don't think is clear is where does the cash currently reside? Personal or in a current company?
If you were to invest through a company what is the 'exit strategy'?
Whilst you can never be certain, the chances of Income Tax being messed about with are IMO less than business taxation which does make planning easier.
don't forget the incoming dividend tax!
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Post by propman on Feb 29, 2016 13:36:22 GMT
You also need to look at the value of the company relative to the cost. If this is a trading business, you should get a preferential CGT rate on sale. If it is a CIC, then full CGT rates probably due.
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