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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5029
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I own 100% of a limited company (Company A), which has set

Customer Question

Hello,
I own 100% of a limited company (Company A), which has set up another company with a partner (Company B). Company A is listed as owner with 51% of shares in Company B. When incorporating Company B, I also listed Company A as having £750 unpaid towards the 51% shares, as I wanted to invest this into the new company.
Can I make a capital investment directly from Company A to Company B, or will I have to set it up as an interest-free loan in order to stick with HMRC compliance?
Also, as someone who is hoping to invest in many more companies going forward, will the case be the same for all of them?
I currently only use Xero for all accounting purposes, but as you can imagine it lacks as far as specific scenarios such as this go :)
Thank you for your help!
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your question.
if Company A owns 51% of Company B and the nominal value of this investment is £750, there is no reason why Company A can't make the capital investment directly. After all, company A is a shareholder and this payment is a consideration for acquiring 51% of the called up share capital.

The same would apply if Company A were to make further investments.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 1 year ago.
Much appreciated, this is along the lines of what I was thinking, but the internet had me worried for a second :)Just one quick follow up, for future investments, let`s say I`d like for Company A to invest £1250 rather than £750, could I then invest this and for Company A debit securities under assets and credit cash, while Company B debits cash and credits paid-in capital?I`ll be sure to make the rating top-notch :)Thank you!
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply.

You are correct in your accounting treating of the investment.

I hope this is helpful and answers your question.

I will appreciate if you would kindly rate my service/accept the service I have provided before you leave the site, to ensure I get credited for it by Just Answer.

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Expert:  taxadvisor.uk replied 1 year ago.

I thank you for accepting my answer.

Best wishes