Using cash to set up company to invest in shares

wyrleyite

I've just been mulling something over and would like your collective opinion. (Had a beer so bear with me):beer:

If you had a sizeable sum to invest would it be worth/is it possible to set up a company, use the cash as equity and declare yourself sole shareholder and then invest the money (ie shares, ITs etc).

What do you think?:undecided

marathonic

If it were possible, I believe that the earnings you take out of the company would be taxed at a much higher rate than the CGT and dividend tax due if you were just to hold them in your own name.

wyrleyite

When you say earnings I assume you mean profit? If so how would you take them out? Surely, you could just reinvest them into the business or use expenses to ensure your profits weren't too high?

CLAPTON

what benefit do you think this would give you that justifying losing the ISA benefits and you personal cgt allowance?

how sizable is sizable?

Aretnap

wyrleyite wrote: »

When you say earnings I assume you mean profit? If so how would you take them out? Surely, you could just reinvest them into the business or use expenses to ensure your profits weren't too high?

Perhaps, if you plan to keep reinvesting the money forever and never spend it. But sooner or later you're presumably going to want to spend the money on your general living expenses in retirement, or on holidays, home improvements, fast cars, wine, women, song etc - otherwise what's the point of having it? Spending money on those things means taking it out of the company - either as dividends or by taking a salary as an employee of the company - and that means paying tax on it.

You can offset legitimate business expenses against tax/profit, but the business expenses associated with running a company which just invests in shares etc are not exactly massive. You might be able to wangle a new computer or a subscription to the Financial Times as a business expense, but you can't put your general living expenses down as a cost of doing business. And HMRC are wise to people claiming that every time they get into their cars it's "business mileage" (and anyway, where do you have to drive?) or that every meal out they have is a "meeting with clients" (what clients would you have anyway?), and so trying to pass off their general living costs as expenses.

jimjames

wyrleyite wrote: »

I've just been mulling something over and would like your collective opinion. (Had a beer so bear with me):beer:

If you had a sizeable sum to invest would it be worth/is it possible to set up a company, use the cash as equity and declare yourself sole shareholder and then invest the money (ie shares, ITs etc).

What do you think?:undecided

Sounds like a great idea.

There are plenty of companies setup specifically to invest in shares. They are called investment trusts.

Unless your pot is in the millions you may find it better to buy into one of those rather than doing your own.