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Post by rich25411 on May 29, 2017 13:35:36 GMT
Hello everyone,
I own an eCommerce company and was wondering if there could be any negative implications with HMRC on investing idle company funds into P2P?
I got told last week that our company could be viewed as an "investment company" and that it may need to be taxed differently if we hit over a certain threshold in P2P.
With savings accounts offering such low %, I want to keep our money moving into something worthwhile and flexible, but at the same time I don't want to over-complicate things too much, or be walking into something I'm totally unaware of.
I'd image many others on here will be investing idle company funds into P2P? Any thoughts?
Thanks so much!
Richard
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david42
Member of DD Central
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Post by david42 on May 29, 2017 18:21:35 GMT
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Post by andrewcfa on May 30, 2017 13:37:45 GMT
Hi Rich25411, I asked the director of Crowd for Angels Tony, about your question and he had the following responce: "This is the definition of a Personal investment company (PIC)If you have a sum that you wish to invest and grow for the benefit of your heirs, but want to retain future control of how that investment is managed and distributed a Personal Investment Company (PIC) might be the right structure for you. Here are the benefits of a PIC, including the tax implications.Personal Investment Company (PIC)- is a tax efficient vehicle in which to accumulate wealth;
- a PIC should be considered as a long-term investment strategy;
- can hold any asset class;
- taxed in the same way as any UK company so all income and gains subject to UK corporation tax at 20% (falling to 19% from April 2017 and 17% from April 2020) - compared with top individual tax rate on income of 45% and on gains of 28% and trust rate of 45%. This can mean that the PIC potentially has over 20% extra income to reinvest compared with an individual investor;
- gains will be subject to tax at 20% but PIC can claim indexation allowance when calculating gains;
- investment management fees will be a deductible expense in calculating the PIC’s taxable profits. An individual investor cannot deduct such fees in calculating his taxable income;
- rental losses can be set off against other income.
A PIC is therefore a tax-efficient way of growing wealth for your heirs while retaining control.It is unlikely that a relatively short-term exposure to P2P or crowd bonds would make the company an Investment company if the company carried out its main business which is an e-commerce company.I hope that helps, but I'm sure Tony would be happy to talk if you wanted clarity. Kind regards, Andrew |
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Post by rich25411 on May 30, 2017 19:28:46 GMT
Hi Andrew,
Thank you so much for your reply. I understand everything you wrote, I'll just carry on the way I am and speak with my accountant too when I get a chance. Like I said, our main business is ecommerce, P2P is just a drop in the ocean compared to our income from ecommerce.
Thanks again,
Richard
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nick
Member of DD Central
Posts: 1,055
Likes: 825
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Post by nick on May 30, 2017 21:04:13 GMT
Hello everyone, I own an eCommerce company and was wondering if there could be any negative implications with HMRC on investing idle company funds into P2P? I got told last week that our company could be viewed as an "investment company" and that it may need to be taxed differently if we hit over a certain threshold in P2P. With savings accounts offering such low %, I want to keep our money moving into something worthwhile and flexible, but at the same time I don't want to over-complicate things too much, or be walking into something I'm totally unaware of. I'd image many others on here will be investing idle company funds into P2P? Any thoughts? Thanks so much! Richard I believe the general rule of thumb is that no more than 20% of income or gross assets can arise from non-trading sources to qualify as a "trading company" so it doesn't sound like this is going to be much of an issue of in your particular case. FYI, the main benefit of being a trading company versus investment company is that entrepreneur relief is available on disposal/wind-up of the company. In the past a non-trading company could not enjoy the lower small company corporation tax rate, but this is no longer following the adaption of a single lower corporation tax rate so the classification has little impact from a pure corporation tax perspective.
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