Limited Company Investments
Howdy!
I'm looking for suitable investments for a small limited company with around £100,000 in liquid assets. They only want to invest around £20k. I'm thinking along the VCT route perhaps...anyone got any suggestions - all gratefully received -thanks in advance.
Sue Holmes
Comments
I would carry out a risk profile excercise and recommend a suitable multi-asset fund.
Is there a particular reason why they want to invest through their limited company?
The issue with a company investing is that the gains are subject to corporation tax and the owners would typically be taxed again when they look to draw the funds out through a salary or a dividend.
You also have the issue that too much cash/investements within a company sometimes threatens the trading status of the company, making entrepreneurs relief unavailable.
Do the owners have pensions? It could be more efficient for the company to make employer pension contributions.
Or simply drawing dividends and opening up ISAs in their own name could be a more appropriate solution.
It's impossible to predict tax changes but a hike in corporation tax is likely.
Thank you for your comments - I pretty much agree with your comments, but the adviser wanted to see if there was anything else out there. My preferred choice was to go down the pensions route.
Definite no to a VCT. If you're going to use a VCT then take the cash out of the business and get 30% of the tax paid back through the VCT relief on a personally held investment. But don't do that.
If the company is making the investment then a single fund that pays income as dividends is the most tax efficient. Dividends are not taxed as trading profits and capital gains are subject to corporation tax. Something like Vanguard Lifestrategy 60% or higher is a starter for ten.
Pensions relies on the capital being given to individuals in the company - this might not be the objective if there are several shareholders but if it is a sole owner/couple then it could be the best option, subject to being ok with access restrictions and having allowance available.
Hi Thanks for that Benjamin. We are going down the Pensions route as the company is owned by a couple and so it's probably the best and easiest way to do it. They are not really high net worth and therefore I don't think the VCT route would be appropriate.. Thanks everyone.