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HM Accountax Ltd
HM Accountax Ltd, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 175
Experience:  I am an accountancy professional with more than10 years hand on experience in audit, accountancy and tax affairs.
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I am a UK citizen resident (including for tax purposes) in

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Hi.I am a UK citizen resident (including for tax purposes) in France since 2015.I own a 10% share in a UK Ltd Company ("Company A") and 100% of a second UK Ltd Company ("Company B") - the latter of which I might be selling soon.I am in the process of setting up a 3rd UK Ltd Company ("Company C") into which I intend to transfer ownership of both of the above shareholdings.I've got 4 questions:-1. Let's say that Company A makes £1m profit before tax next year - i.e. £800k after Corporation Tax (assuming a rate of 20%) - and decides to pay all of that as dividend i.e. Company C will receive a £80k dividend from Company A.
As that Dividend is already net of tax, is the £80k Dividend income for Company C considered to be tax-exempt?2. Now let's say that, also next year, I sell Company B for £500k. Additionally, other activities carried out by Company C bring in a further £100k net profit.
So Company C's Corporation tax bill will be (£500k + £100k) * 20% = £120K. Correct?
Leaving a Net Profit After Tax of £480k plus the £80k dividend i.e. £560k - Correct?3. Now let's say that in 2022 and 2023 net profit AFTER Corporation tax is £200k in each year. So now the accumulated profit after tax of Company C is £560k + £200k + £200k = £960k.
No dividend is paid in 2021, 2022, or 2023, but at the beginning of 2024 I decide to pay the full accumulated profit of £960k as a dividend. Can I do that? If no then why, and if yes then are there any limits as to how many years' accumulated profit I can pay out in a dividend?4. Finally, assuming that when I create Company C I include in its Articles of Association that it can lend money to anybody including Directors and/or Shareholders at market rates, can I do the following:-
- Purchase a house in France for, say £500k
- Borrow £350k of that from the Company C under the same terms as I would expect to get from a mortgage lender e.g. 2%pa interest rate, 1st charge on the property, life insurance to cover debt, proper signed loan contract, etc. ?

Hi,

I am an advisor at Just Answer and I am happy to assist you.

Please see below my response to your queries:

1. Yes, correct - No CT implications.

2. CT £120k - Correct

Net Profit £560k correct

3. Yes, you can do that - But make sure you consider the income tax implications before declaring such dividends,

4. Yes, you can do that. There won't be beneficiary loan charge for director but you'll be liable to s455 charge on loan o/s 9 months post year end. s455 charge is 33% payable to HMRC but will be refunded once the loan is repaid by the director.

I hope it answers your queries.

Regards

HM Accountax

Ps. CT rate is 19% but for simplicity of calculations assumed 20% & there are chances the CT rate might increase in following years.

HM Accountax Ltd and other Tax Specialists are ready to help you