UK Tax

UK tax questions? Ask a UK tax advisor for answers ASAP

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

Hi, I currently own a business (51% stake with my wife retaining…

Hi, I currently own a business...
Hi,

I currently own a business (51% stake with my wife retaining the rest) and am about to acquire a 15% stake in another business.

In addition I am going to be launching a new business in the next 8 weeks and will have an 80% stake which will reduce down to 60% if my business partner achieves agreed sales targets.

The question is whether it would be better for me to own the stakes in the new business in my own name or whether I should use my existing company to hold the shares - which I have done before.

Are there any tax benefits to either scenario and are there any risks associated in particular if one of the businesses I am taking a stake in goes into administration or liquidation.

Thanks in advance for your advice.

Neil
Show More
Show Less
Ask Your Own UK Tax Question
Answered in 22 minutes by:
7/9/2012
TaxVince
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 972
Experience: Chartered Accountant >20 years + Qualified IFA
Verified
Hi

I hope i can assist. Please clarify if you are a sole trader or you have registered these companies as limited companies. As you may know that a sole trader is personally liable for all the business liabilities and if the businesses takes a turn for the worse, it can lead to the nightmare scenario of losing all your assets no matter what structures you have in place. This is different from limited companies as liabilities are limited to company level. The tax implications of sole trader business/limited partnerships are also different and hence if you clarify the question - i would be able to assist further.
Ask Your Own UK Tax Question
Customer reply replied 5 years ago
Hi,

All companies are and will be limited companies.

Thanks,

Neil
Hi Neil
The main tax benefit of owning the underlying investment through your existing company is the group relief schemes eg. if one company makes trading losses, you can get them taken off from another company’s taxable profit (within the same group), thereby reducing your overall tax. Broadly, the grouping requirement for this relief applies if one company has 75% or more of the other company's ordinary share capital, through direct or indirect ownership. Losses can be surrendered in any direction – from parent to subsidiary company, subsidiary to parent company or sister to sister company – if the companies satisfy these tests. To see the list of group reliefs check out this link http://www.hmrc.gov.uk/manuals/ctmanual/CTM80110.htm
In terms of liquidation/solvency/administration risk, there is not much difference between the two structures ie whether you own directly or through other companies as liability in limited at each company level i.e limited company.
One other advantage of a group structure is that its easier to transfer funds between companies whether on temporary or permanent basis, though too many inter company transactions may not be desirable given that you intend to reduce your ownership. Another advantage of group structure is that its easier to support a subsidiary through the holding company providing a letter of support/comfort/guarantee to a subsidiary, without exposing your personal assets to solvency risk.

In conclusion, if your underlying investment is likely to be 60 % as you said, there seem to be no group reliefs benefit; and the administration/solvency issues are hardly affected with either structure; therefore there is no difference between the two structures in terms of tax and financial risk. It might be better to go one which is easier to implement.

 

Regards
Ask Your Own UK Tax Question
Customer reply replied 5 years ago
Hi,

Thanks, XXXXX XXXXX your feedback so far.

In terms of tax however if I were to own by equity stakes as an individual rather than through a holding company does that not affect corporation tax rates for the companies I own 50.1% + of?

Neil
Hi Neil

Sorry for late reply. None of the two affect your effective corporation rate. Im sure you are referring to the issue of associated companies. Companies are associated when they are controlled by the same person or persons (whether this is in a group structure or if they stand separately to each other) - therefore in your case either way the two companies are associated companies.

Associated companies affect corporation tax rate as follows:

The Corporation Tax rates for a company with no associates for the 2012/13 tax year are as follows:

Taxed at 20% The first £300,000 of taxable profits
Taxed at 25% The next £1,200,000 of taxable profits
Taxed at 24% All taxable profits exceeding £1,500,000

However, if there are associated companies these limits are divided equally between them. For example, for a company with two other associates (i.e. three companies in all), the limits must be divided by three. Each company will calculate its tax bill in accordance with the following rates:

Taxed at 20% The first £100,000 of taxable profits
Taxed at 25% The next £400,000 of taxable profits
Taxed at 24% All taxable profits exceeding £500,000

The idea behind these rules is to prevent companies running their activities through multiple companies in order to keep their taxable profits in the 20% band.

If the profits of the companies are unevenly distributed the effect of these rules can be to dramatically increase the effective rate of Corporation Tax. This happens when unprofitable companies do not use their 20% tax bands to the full, whilst their associates pay tax at 25%.

Therefore in conclusion, there are many good commercial reasons to invest through another company rather than directly - to reinforce the identity of subsidiaries, to protect other group companies from the potential liabilities of a risky venture, easier interco transfers, etc. But there is not much tax difference between the two options.

Regards
TaxVince
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 972
Experience: Chartered Accountant >20 years + Qualified IFA
Verified
TaxVince and 87 other UK Tax Specialists are ready to help you
Ask your own question now
Was this answer helpful?
Ask TaxVince Your Own Question
TaxVince
TaxVince
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 972
972 Satisfied Customers
Experience: Chartered Accountant >20 years + Qualified IFA

TaxVince is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Sam

Sam

Accountant

6,512 satisfied customers

26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax

bigduckontax

bigduckontax

Accountant

871 satisfied customers

FCCA FCMA CGMA ACIS

TEAP007

TEAP007

Tax Preparer

759 satisfied customers

Fully Trained Inspector of Taxes / District Inspector/ Team Leader/ Offshore Consultant/ 41 years

Andrew Baker(baktax)

Andrew Baker(baktax)

Personal Tax Adviser

756 satisfied customers

35+ years experience in income tax, CGT, non-residence

berduchwal

berduchwal

Accountant

669 satisfied customers

Qualified accountant and bookkeeper running my own practice since 2008.

Clare

Clare

Solicitor

148 satisfied customers

25 years exeperience as a high street solcitor

Mrs-Tax

Mrs-Tax

Tax Adviser

59 satisfied customers

Law Degree, 19 years in UK Tax.

< Previous | Next >

Related UK Tax Questions
I need to repeat my question as previous chap looked like
Hi i need to repeat my question as previous chap looked like American tax person … read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
871 satisfied customers
I would like to ask. When should my client give me the total
HiI would like to ask. When should my client give me the total hours for his employees if the next Payroll run is on 30/04/2018? When is the last day I can run payroll for him so it is all good with H… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,161 satisfied customers
Hope you are doing well. I am sorry to be bothering you
HelloHello Paul. Hope you are doing well. I am sorry to be bothering you again, but I wonder if you would be able to answer me on one question? :-) I let me client know that I need all hours from his … read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
871 satisfied customers
I have a US 401(k) pension account from the time I worked in
I have a US 401(k) pension account from the time I worked in the US. I am a UK resident. I intend to liquidate the entire balance early (I am 45 years old) and transfer the money to the UK, rather tha… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
What account should I put HOliday payment? Should this go to
HelloWhat account should I put HOliday payment ? Should this go to Net Wage Control account (the same as wage payment)? Thank you… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,161 satisfied customers
I would like to ask regarding new incorporated company. It
HelloI would like to ask regarding new incorporated company. It was incorporated today. Is it possible to include into accounting expenses incurred before incorporation day? Thank you… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,161 satisfied customers
I would like to ask. If one person is director of 3
HelloI would like to ask. If one person is director of 3 companies, does he submit only one tax return or 3x tax returns? Thank you… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,161 satisfied customers
We are Brits visiting Florida on a vacation (~ 5 months). We
Hello, We are Brits visiting Florida on a long vacation (~ 5 months). We are incurring sales tax on many transactions. Q. Are we able to claim this back when we leave America or arrive in the UK pleas… read more
TaxVince
TaxVince
Accountant
972 satisfied customers
I would like to ask. If one person is director of 3
HelloI would like to ask. If one person is director of 3 companies, does he submit only one tax return or 3x tax returns? Thank you… read more
TaxVince
TaxVince
Accountant
972 satisfied customers
My friend is taxi driver. He makes around 2000 miles per
HelloMy friend is taxi driver. He makes around 2000 miles per month. Also he pays £180/week for his car (cost of car, road tax, insurance - all is included in this). Question is: is it better to selec… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,161 satisfied customers
Our UK company has not traded yet (in the UK) albeit
Our UK company has not traded yet (in the UK) albeit registered for 1+ year now. We have not made any sales/purchases and have no employees etc. My question is, are we able to file under the micro ent… read more
TaxVince
TaxVince
Accountant
972 satisfied customers
UK tax law: Setting: A is a TA at a private school. Her
UK tax law: Setting: A is a TA at a private school. Her eldest child died tragically in March. School mgt have granted her 2 weeks paid compassionate leave. Any leave beyond that is unpaid. A's collea… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
871 satisfied customers
I would like to ask. If my client is taxi driver, and pay
HelloI would like to ask. If my client is taxi driver, and pay for his car rent monthly rent. What is the best way to count his motor expenses? Is it rent payment or mileage done or both of them ? Tha… read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,161 satisfied customers
Could you, please, advise? I am planning to hire contractor
HelloCould you, please, advise? I am planning to hire contractor for bookkeeping task. She is still student (29 years), working for somebody ells on PAYE at the same time. What is the best way to pay … read more
taxadvisor.uk
taxadvisor.uk
Accountant and Tax Practitioner
Chartered Certified Accountant - FCCA
3,161 satisfied customers
I am a self employed Photographer in Ireland - although
Hi, I am a self employed Photographer in Ireland - although originally from Poland. Next year I am planning to return to Poland where I intend to register as a self employed photographer there. I am c… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
871 satisfied customers
I am in need of some advice with my uk finances however
I am in need of some advice with my uk finances however i'm Living abroad at the moment … read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
871 satisfied customers
How do I find out if I owe any tax. I have been told by an
I have been told by an accountant that I should be owed over £9'000 for the over payment of tax I have paid over the last 5 years, but I don't know how to find out if I owed this money beforehand or not … read more
Sam
Sam
Accountant
Higher Officer HMRC
6,512 satisfied customers
Good mmorning- yes resident and want to transfer funds from
good mmorning- yes I am UK resident and want to transfer funds from a South African provident fund to the UK. Some of the money wl be going to my daughter and son in law as a wedding gift ( married in… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
871 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x