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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I run by myself a small yet successful UK "Security for hire

Customer Question

I run by myself a small yet successful UK "Security for hire business". It is starting to bring in some good revenues. Revenues that for my future I would like to reinvest into other businesses and assets rather than take as profit (I am happy with a salary, what I want is longevity in business). On the side I have set up and helped build my wives Doggies day care, which again has become successful.
I myself want to start a chauffeuring company and diversify my portfolio - Eventually years in the future being able to become a professional investor, running a portfolio of businesses myself. I also want to pour pre tax profits into property as well as other investments, something stable and able to provide income and gain returns as assets. All in all, I want to build assets, credit, and leverage. keeping companies separate from each other, but all counting towards the goals of building a sustainable and profitable future for myself and family. I would rather each quarter work out what I have made the companies in profit. Take 20% of that profit for myself as a dividend - then reinvest 80% before the tax man gets his hands on it.
If I have a holding company (That manages and controls the companies). If say the security company makes pre tax profit of £100,000 could I then take £20k, before the end of the tax year, and put £80k ready to invest it into say buying chauffeur cars in my chauffeur company, or down on as a deposit in my property company. All before it gets end of year corporation tax? obviously paying corporation tax and such on the dividend
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
Within a company group profits and losses can be offset upwards, downwards and sideways to utilise the losses in the most efficient manner for Corporation Tax (CT) purposes. The 20K you take out can either me by means of dividends, the distribution of which does not relieve the company of CT whilst if it is by salary it does. If another company's tax position was put into the negative by the application of capital allowances following the acquisition of plant and machinery (and cars), which currently these days can be as high as 100% (although this treatment for cars is only available for those with very low emission levels, higher levels attract lower percentages) then this loss for tax could be used elsewhere in the group to mop up profits.
I hope that you can now see the way ahead CT wise. You may find the computations and subsequent juggling a bit to complex and it might be a good idea to retain a local, trusted professional to oversee the process.
Customer: replied 2 years ago.

ok, just to clarify. Because I think you have put my mind at ease but just to be sure.

so if my company "security guards for hire" makes 30K Pre tax profit

my "Chauffeur limited" company makes 150k pre tax profit

My pub group "events and bars limited" makes £800k PTP

Has the holding company made: 980K

and say I take 20k for myself, and pay tax on that. Just before the year end can I invest the 950K back into "events and bars limited" showing the holding company to only have made £10k profit?

Expert:  bigduckontax replied 2 years ago.
No, I fear you have got it slightly wrong. You cannot gain any tax advantage from inter company transfers as those transactions are outside the scope of CT. Even if you invoiced the transfer from one to the other in CT terms it would be a lemon as for one it would be a profit, in the other a loss.
However if you send the 950K down the chain and use it to invest in new equipment that that will attract capital allowances and could put the organisation into a CT loss situation which can then be exploited to reduce other companies within the group's individual CT positions.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3119
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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