Q. I am accumulating money in my company’s account which I can’t take out and I’d like to invest in funds and property. What investment platforms allow me to invest that money as my company and are there any special considerations when it comes to buying property as my company?
A. The first part of your question can only be answered by someone who is qualified to provide investment advice & I would encourage you to seek out for example, an IFA or speak to your bankers.
If you are intending to let the property then all rental income is treated as the profits of a property business and subjected to corporation tax.
Consideration needs to be given to when you eventually dissolve the company and wish to claim Entrepreneurs Relief (ER) so as to ensure that a final distribution is treated as capital and therefore subject to 10% capital gains tax. One of the conditions for ER is that the company must be a trading company throughout the year ending with the disposal. Many companies will have some activities that are not trading activities. The legislation provides that such companies still count as trading if their activities “… do not include to a substantial extent activities other than trading activities”. Substantial in this context means more than 20%. In deciding whether or not this 20% limit is exceeded HMRC will look at, amongst other things:
Income from non-trading activities
A company may have a trade but also let an investment property. If the company’s receipts from the letting are substantial in comparison to its combined trading and letting receipts then, on this measure in isolation, the company would probably not be a trading company.
Asset base of the company
If the value of a company’s non-trading assets is substantial in comparison with its total assets then again, on this measure, this could point towards it not being a trading company.
It may be advantageous to set up a wholly owned subsidiary of the main trading company for the purposes of investment of surplus funds. A loan could be made from the main company to the subsidiary for investment purchases and dividends declared to the parent timed so as to avoid the 20% threshold (and the property/investment gains remain outside of the parent company so the asset limit should be manageable too)