Limited Company - investing surplus funds

waveneygnome

Asking for a friend:

1 owner/shareholder Limited Company.

(maxed out pension contributions)

(has sufficient cash savings/buffer)

Now the business is generating surplus funds in the region of £3k pcm, and hopefully will continue to do so.

She wants to continue adding £1k to cash savings, and invest £2k pcm for long term 10 yr + (until retirement)

Her accountant has come up with:

Company opens up an account with Fundsnetwork / Fidelity

split the money 3 equal ways:

Fidelity Open World

Liontrust Sustainable Future Global Trust

Royal London Sustainable Leaders Trust

Does this sound OK?

Her risk profile was 8..........I suggested putting it all on black....but she said no.......all on green.

Thrugelmir

Is her accountant also an investment advisor? 

You do realise that capital gains made will be subject to Corporation tax? 

steampowered

You wouldn't normally go to your accountant for advice on which investments to choose.

Though the accountant would advise on whether it is more tax efficient for the company to invest, or for the company to declare dividends and the individuals to then invest through a tax efficient structure (such as pension contributions on which tax relief can be claimed - very attractive for higher rate taxpayers; or a stocks & shares ISA.

If this money is there for the long term it should certainly be invested rather than losing money each year to inflation in a savings account, but it is incumbent on your friend to understand what she is investing in.

I do not understand why £1k is going into cash savings, and £2k into investing. Savings accounts are a bad idea full-stop if you are looking at a 10+ year timeframe - it just means throwing money away due to inflation. Over a 10+ year timeframe the whole £3k should be invested.

waveneygnome

Accountant is not an investment advisor - but the accountant has a 'man' who he 'suggests' his clients liaise with, who is and IFA/did the risk profile with.

My friend is withdrawing from the business the usual low salary/high dividend, just up to the level of HRT, and doesn't want to go over the threshold/does n't need the money personally now.  She would rather save it for longer term/retirement/withdrawal from the business in future years.
She has max'd out on pension contributions (40k pa/used up previous tax years using carry forward).
And now has 2yrs business profits saved as cash/deposit accounts.

So.........what else to do with the surplus money?

I've suggested looking at another business to buy into/or a rental property (either residential or commercial), but she wants something that is not going to take up her time (she's pretty full on/long hrs at present 'day job')

Her accountant suggested this as an option.

Yes - I agree that if she does go down this route, then might as well invest the whole £3k rather than top up savings.

andy001

Please see link below, which discusses pros and cons. Hope it helps your friend

https://www.alchemyaccountancy.com/news/blog/can-i-invest-funds-in-limited-company-in-the-stock-market/

waveneygnome

Thanks andy001.
I've read this/explained to friend...the account said yep, agreed with the article, but my friend's business is throwing off lots of cash at the moment, and his suggestion for an investment of £2k pcm was a fair balance to the other measures he's proposing.

So the question I wanted to ask now:

Are these 3 funds OK for this type of investment/time horizon?

Fidelity Open World

Liontrust Sustainable Future Global Trust

Royal London Sustainable Leaders Trust

NedS

When you say maxed out pension contributions, do you mean she is already contributing £40k/year to her pension (personal and company contributions)? If not, increase the pension contributions. Could she carry forward unused allowance from previous years?

waveneygnome

Re:  maxed out = yes.  Has used carry forward allowance 2 yrs ago, and has paid £40k in each yr since.  So no more allowance left, until next year.  (All company contributions).