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Sam
Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Hi I have a small ltd company and two months ago sold half

Customer Question

Hi
I have a small ltd company and two months ago sold half of it.I had the monies lying in my company bank account but receiving no interest. I am putting it in unit trust and bonds in the hope of earning some interest.
I am told I will have a large capital gains tax bill next year.
After I have paid the tax will I be able to draw a dividend from the invested moneys each year.
many thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question
Yes you will have a capital gains bill due to the sale of the half share of the company.
And if he investment you make allows for a down draw (so do check what is permitted with the investment you choose)then this will be liable to tax at source through the investment company you invest with. (whether this be interest or dividends)
Thanks
Sam
Customer: replied 1 year ago.

Im not sure of your answer,

does it mean I can draw a dividend from my company on these investments.

Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
No, these would have to then become personal investments, as you accrued the money due to sale of the half share of the company.
Thanks
Sam
Customer: replied 1 year ago.

Im still not sure.

the sale moneys are invested in my company name and not personal.

Expert:  Sam replied 1 year ago.
Hi
Thanks for your question
if you have sold a half share of the company - and have decided to not take the money out, then these form a credit in the directors loan account, but are not eligible for any further taxation (unless you will be paid interest for the loan) as the funds would have suffered capital gains due to the sale, and not subject to any further direct taxation in themselves.
If you choose to "charge" interest on these left funds, then this is liable to UK tax, but you cannot draw out a dividend instead
If this does not fully answer your question, then please advise what you are trying to achieve and I can advise further
Thanks
Sam
Customer: replied 1 year ago.

Im sorry for going on and probably not coming over properly.

I was told that these moneys are my companies moneys and if I draw them personaly I will be liable to a large amount of personal tax,so I have invested them in the company name thinking I could draw a dividend each year from these as company profits.

Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
Once you sell a half share of the company - its YOUR money not the companies.
The sale itself will create a capital gain (but its charged as corporation tax) regardless of whether you draw the money or now and you will also will be subject to capital gains tax, (as this will apply to assets and goodwill etc) on which entrepreneurs relief will be due - thus reducing the capital gains down to 10% for your personally.
This is because you are selling your shares in the limited company. This is a PERSONAL gain
You cannot choose not to "take" the money under this set of circumstances, you are going to sell, and therefore have to be considered on the relevant taxes due.
If you then choose to invest the money back into the company then this will form a credit in your directors loan, you cannot draw a dividend on that element of the money - as its not annual turnover that the company has made, but profits from the actual half sale of the company.
So this money will NOT be subject to further tax as its been subject to corporation tax (following the sale of any assets and goodwill) subject to capital gains on you for the sale of your personal shares in the company, as its then treated as your income, and you have then chose to invest.
You cannot then draw an investment made as a dividend - unless you then buy back shares - which defeats the object of seeking them just to buy them back!
I have no idea who told you the information you are led to believe, but we are tax experts, some of us EX HMRC and most of us accountants with our own businesses, but if you wish further clarification then telephone HMRC who will advise as I have. The fact you sought advise in the firs place. might suggest you were not entirely happy with the information you already held in your procession.
Let me know if I can be of any further assistance. I am sorry I am not telling you want you want to hear, but I can only give you an honest and accurate answer, which I am sure you can appreciate.
Thanks
Sam
Customer: replied 1 year ago.

Thank you very much Sam.

I still own all the shares in the company but have sold half of the companys assets/machinery we make profit from,sorry for the confusion

Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
Then half the the company has not been sold? Then then its just corporation tax due on the company profits which will include the sale of these assets, so yes you can draw this as dividends from the company.
Thanks
Sam
Customer: replied 1 year ago.

Thank you so much Sam,

apologies for putting it over wrong

Thank you for your help.

Expert:  Sam replied 1 year ago.
Hi
That's not a problem (we got there in the end!)
If I could trouble you to rate the level of service I have provided, it would be appreciated as Just Answer will then credit me for my time, and any feedback or a bonus are always welcome
Thanks
Sam

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