Investing company funds - which platforms

Lrimas

Hi all,

I have recently started my own limited company and I would like to invest the money that I am leaving in my company account (via a second company that I loan the money to).

Has anyone done anything similar?

Can I use any investment platform (I currently use Halifax for my personal investments) or is there only certain platforms that will allow you to invest company funds?

I'm really struggling to find anything online.

LHW99

Would you really want to invest it? Surely if that's company cash it should be availble for covering periods when the customers suddenly stop paying on time or a vital machine breaks down or the roof blows off the office.
There are business savings accounts, and also I think business fixed period deposits which would probably be better than investments, especially if you're a recent start-up.

grey_gym_sock

if your company has cash surplus to the business' requirements, then a more obvious route is for the company to make employer pension contributions into a personal pension for you. this is a tax-deductible expense when working out the company's profits for corporation tax (providing you do enough work for the company to justify it as a business expense).

if you really want to have the company invest, this is possible, though i'm not sure which platforms offer company accounts. and i think there may now be extra costs if you want to invest in exchange-traded investments, because your company will need to obtain a LEI (legal entity identifier). but i think you don't need a LEI if you only invest in unit trusts / OEICs.

Lrimas

Thanks LHW99 & grey gym sock.

Those are very sensible comments.

I will be paying a suitable amount into my pension but that still leaves me with a fair amount. With the rest I can either:
1) Increase my pension contributions to the full amount I'm allowed. This will leave me as a very rich 55 (57/60?) year old but possibly cash strapped through leaner years. I also want to retire when I'm ready and not when the government tells me I'm allowed.
2) Invest the money in a suitably diverse fund. While I'm aware that this carries risk it is a risk that I am happy to accept. I will off course have to pay 25% tax on all profits but I have calculated that is still more profitable than options 3&4.
3) Leave money in my company account meaning it will earn no interest. This will cause the money to lose value due to inflation each year - not a "risk" I am willing to accept as it can easily be prevented by investing.
4) Increase my salary and invest the surplus personally. This is an option but it will increase the tax I pay grately. I'm not adverse towards paying the tax I have to but part of the risk of having a company is that there will be times that you don't earn money. I would rather be able to continue paying myself during these periods.

(2) seems to be the most sensible option and the only one that will allow me to realise my financial goals.

My plan was to invest primarily in ETFs - thanks for the tips about the extra fees. It looks as if this might be more of a minefield than I originally thought and I will have to get a financial advisor.

cloud_dog

You've not really told us a lot about yourself, i.e. age, what other savings or investments you may have, if the money may be required in the near/medium term (although if you are investing then that cannot be a consideration).

Based on the fact that you do not require this money in the near/medium term based on you looking to invest, and without knowing anything else about you....based on your supplied options I would go with option 1, and do your investing that way.

Lrimas

Hi cloud_dog,

The reason why I haven't given much information is because I have already decided to go with option (2). I am happy for people do give other opinions but that would be unlikely to change my mind.

What I am looking for is information on how to do it. Can I open an account in my business name on any platform or just certain platforms. I would like to go for a low cost platform like Halifax sharedealing but not sure if it is possible.

dunstonh

Will you be using a tax wrapper within the business or holding the investments unwrapped? There are tax consequences (pros and cons) for both.

What accountancy method is used for your business? This can impact on how the investments are taxed.

Lrimas

Hey dunstonh,

I'll be creating a second investment company to manage my investments to ensure that I can keep entrepreneurs relief on my primary company and I keep the business activities separate. I will then loan the money to the second company.

That means it doesn't really matter which accountancy method I use as the company won't have clients (other than me). Cash probably makes the most sense.

I didn't realise I could have a tax wrapper inside a business. Isn't all profits taxed at 25% for investment companies.

dunstonh

I didn't realise I could have a tax wrapper inside a business. Isn't all profits taxed at 25% for investment companies.

If you are going to run it as an investment company then it is taxed differently. However, if you were going to invest in the existing company then there are some tax wrappers available and depending on which accountancy method you use, you can defer profits until you create a chargeable gain. e.g. rather than being taxed at 20% CT (as it was) you could defer the profits by not creating a gain on the wrapper until a future year when CT was lower. If you do not create a chargeable gain, the value of the investment remains the same as the total contribution.

its not a bad way of deferring gains until a later year when you know the CT rate is coming down. However, its typically used by those who have already built up a lump sum and are investing as a lump rather than periodically and the company is not classified as an investment company.

stphnstevey

Since Jan this year you will need a LEI costing £115 + VAT (£140) with annual renewal fees of £70 + VAT (£84)

AJ Bell and iii do a company account but wont allow you to ope one till you have a LEI

I have a company and was contemplating the same thing (just couple of months too late for the LEI requirement)

You might consider P2P - there are some lower risk P2P or you can go full tilt at the 15%+ (not including defaults). Most will allow a company account

I would be interested to hear what you end up with, feel free to PM how you get on and I will be happy to help if I can

Lrimas

Thanks Dunstonh & stphnstevey, that is really useful information. I'll do some calculations to see if investment company or via my normal company is more efficient (I'll contact my accountant as well but they seem to struggle a bit with tax advice . If you have any recommendations please feel free to PM me).

Glad that III offer company investments. They are not the cheapest but they are close. I will let you know how it goes.