QAA Secondary Market discount tracker (AC)

I'm a retired chartered accountant, not a tax specialist but I know a bit and I know where to look it up.  This should not be complicated at all.  

Would I be right to assume that your company qualifies as a micro entity for tax purposes?  (To be eligible for the micro-entity regime, the company must meet two of the following criteria: turnover of £632,000 or less; balance sheet assets of up to £316,000; average of 10 employees or less.)  If so you will be accounting for your investments on a historical cost basis.  If you sell an investment at a loss that will be a capital loss, end of story.  Not being familiar with your accounting software I don't know what categories of investment it offers you to choose from, but some category of current asset investments would make sense.

If your company is not a micro entity, it should be accounting for all of its investments at fair value through profit or loss...

+1 for all of this.

Similar scenario (although initially with multiple companies); could've done my own accounts and started of by doing so, but chose not because:

• professional assistance wasn't as expensive as I thought^#
• professional assistance meant I was getting up to date, qualified advice^*
• professional advice often provided ways and means of introducing 'efficiencies' that partially off-set the cost of said advice^@
• having the accounts prepared and submitted professionally meant I am able to secure TII (Tax Investigation Insurance)^$

Some notes:
^# - I outgrew my original accountant (a one man band, recommended to me because he was very good, but only had limited capacity and was honest / professional enough to admit it) and he recommended a larger firm. Not exactly one of the 'Big 5' but over a dozen offices, 30+ partners and in excess of 250 staff.  My average fee per company per annum was £1500 and that before any offset might be applied for the aforementioned efficiencies (or charging back my time savings). Then, a couple of years ago, I sold my interests in a number of companies and consolidated down to just one.  That one company now basically hosts my business-related investments it 'inherited' from earlier companies.  Last year I moved away from that larger accountancy firm and - in one of those fortunate quirks of fate / timing - went back to a one-man band who was a former employee of that larger firm and had worked on my accounts in previous years.  Current bill is £600 per annum. Like you, my investment bow has many strings, none of which have caused my accountants any issues whatsoever.

^* - the 'up to date' aspect cannot be understated, imo.  The rules change regularly and subtly; where a certain treatment could be applied to a particular aspect of an organisation's finances in one year, it may no longer apply in following years. Keeping track of these is a full time job which is, imo, best left to those with access to the resources required to make the correct determination on how to apply them.

^@ - the very nature of engaging an accountant means you get the benefit of their exposure to dozens or hundreds of sets of accounts. A gnarly situation they experience with another client may introduce them to a solution which might beneficially be applied to your accounts. Up to a point, this gets multiplied out when you engage a larger firm.

^$ - hopefully you've never had the pleasure of the Revenue inviting themselves around for tea.  I have.  Not nice.  (Was dressed up as a PAYE audit but was actually an IR35 investigation. That was back in 2005 and had it been determined I had been operating inside of IR35, I would have had a near 6-figure tax bill to pay.  As it happened, we successfully defended my position, and there was no bill to pay beyond the additional time spent by my accountants.)  Unless you have the most vanilla of accounts, the reassurances that TII provides is worth every penny, in my experienced-based opinion.


So much for experience and on to pure opinion. I also agree that you are seemingly making this much harder than you need to.  That you have so much doubt as to 'what box to complete' strongly suggest to me that you would greatly benefit from professional assistance.  I take on board your point about 'not having the time' to bring external expertise up to speed, so if your accounts are due imminently and you wish to avoid fines (who doesn't!) then, if you haven't already done so, you may wish to consider amending your y/e date to gain an extra three months and use the time to find a firm of accountants who can handle this issue for you.  It may not be as expensive as you fear - in terms of either time and/or money - and you may even end up better off in terms of both time and money as a result!

Good luck.  The answer is out there although it's often just a much about asking the right question as finding the right person to ask.

Edit - x'd with posts made subsequently to jlend 's but hopefully this is still of use to someone!

Your last sentence above is roughly right for individuals, who pay income tax and/or capital gains tax.  But the rules for corporation tax are different.

For corporation tax purposes, I think the  investment is a loan relationship.  Any losses thereon that are recognised in your statutory accounts in accordance with GAAP should be tax deductible.  What subsequently happens to the value of the investment (eg whether it is written off) is irrelevant as it's no longer in the company's hands.  It is only if you were to hold on to the investment that you might have to wait for a write-off, although a provision for a loss should also be deductible if determined in accordance with GAAP.

Edit:  You might want to look at this, according to which carried forward losses can now be used against all trading profits. 
www.gov.uk/hmrc-internal-manuals/corporate-finance-manual/cfm32030
 

 alender Just to flag that I've edited my last post, so you should take another look at it.

Consistent with the SAIM 12000 Technical Note which describes p2p taxation for individuals. This is taken from the note and points to Loan Relationships in the corporate finance manual.

"What this means for persons Subject to UK Corporation Tax


Persons subject to corporation tax will not be eligible for this relief, but may be able to claim a

deduction for any losses under the Loan Relationships regime - more detail in the Corporate Finance

Manual"

s384B CA 2006 (as inserted by The Small Companies (Micro-Entities’ Accounts) Regulations 2013)
"(1) The micro-entity provisions do not apply in relation to a company’s accounts for a particular financial year if the company was at any time within that year—
... (b)an investment undertaking as defined in Article 2(14) of Directive 2013/34/EU(1) of 26 June 2013 on the annual financial statements etc. of certain types of undertakings, ...

The above-referenced definition states:

‘investment undertakings’ means:
(a)undertakings the sole object of which is to invest their funds in various securities, real property and other assets, with the sole aim of spreading investment risks and giving their shareholders the benefit of the results of the management of their assets, [emphasis added]
(b)undertakings associated with investment undertakings with fixed capital, if the sole object of those associated undertakings is to acquire fully paid shares issued by those investment undertakings without prejudice to point (h) of Article 22(1) of Directive 2012/30/EU;

So it turns on the interpretation of "sole object".  Specifically, is it enough to have other objects, even if they are not currently being pursued?  I have no idea.  Advice needed, I think.

Edit: Actually I do know, but had forgotten.  The definition follows that of an investment trust and should be interpreted as such.  Sole object" means, literally, that the undertaking (for which read company, usually) is not permitted to do anything else.

So alender is in the clear.