New Limited Company - what benefits can I utilise?

Bookworm105

Grumpy_chap said:

Interest on loans from Shareholders / Directors usually has to be set at a rate that is comparable to market rate borrowing.

indeed, & to save me typing I have copied from here: 
A Guide to Directors' Loan Accounts | DS Burge & Co

Interest Payments

Any credit owed by the company to a director will incur interest payments on the total amount in credit. There are no official rules about the stated amount of interest that is applicable, and this is up to the negotiation between the director and the company. However, the company must pay a commercial market interest rate to receive corporation tax relief. The exact commercial rate is likely dependent upon the financial position of the company and its size but can be around 15% per year. (NOTE article appears to be dated Sept 2024 so what was commercial then may not be the case now)

 

Tax Implications

The company must file a CT61 form with HMRC and withhold a basic rate for taxation purposes every time an interest payment is made to a director. The CT61 form is required 14 days after the quarter in which the interest is paid. To ease the administrative burden, most companies opt to pay interest on an annual basis.

The company can gain corporation tax relief on interest paid for the gross amount of the credit, assuming that the interest rate is based on a commercial market rate. The commercial market rate is considered on a case-by-case basis, but to satisfy HMRC, quoted rate evidence is recommended.

Any interest payments made by the company to the director will have to be declared as income through an annual self-assessment. For some directors who receive dividend payments and have a low company salary, interest receipts can be a tax-efficient payment. If the director is a basic rate taxpayer, they can earn up to £1,000, subject to 0% income tax. For taxpayers with higher rates, this 0% tax rate is reduced to £500.

Any interest payments are classed as savings income; therefore, Class 1 National Insurance contributions (NIC) are not applicable.

silvercar

Some things that haven’t been mentioned above that may interest you (I’ve copied from other sites rather than type):

Christmas or seasonal party  - upto £150 per person

As a company director, you can provide an annual event for yourself, any staff you employ, and your partner and reclaim the costs against the company, as long as the cost per head does not exceed £150 (including VAT).

The cost per head can include accommodation, transport, food, and drink – but must not exceed the £150 threshold, even by a penny. The event must also be open to all company staff to attend.

You can hold several events throughout the year, but the total claim for all events must not exceed this threshold. So, you may claim a summer event rather than a festive one. It’s up to the company directors.

Importantly, as with all expense claims, you must hold an event to reclaim the costs against your company. You can’t simply make a cash claim for £150.

To calculate the cost per head, HMRC states that you should divide the total cost of each function by the total number of people (including non-employees) who attend.

Trivial benefits of less than £50 - upto £300 a year 

https://hrdand.co.uk/making-the-most-of-your-trivial-benefits-allowance/

Hoenir

silvercar said:

Some things that haven’t been mentioned above that may interest you (I’ve copied from other sites rather than type):

Christmas or seasonal party  - upto £150 per person

As a company director, you can provide an annual event for yourself, any staff you employ, and your partner and reclaim the costs against the company, as long as the cost per head does not exceed £150 (including VAT).

The cost per head can include accommodation, transport, food, and drink – but must not exceed the £150 threshold, even by a penny. The event must also be open to all company staff to attend.

You can hold several events throughout the year, but the total claim for all events must not exceed this threshold. So, you may claim a summer event rather than a festive one. It’s up to the company directors.

Importantly, as with all expense claims, you must hold an event to reclaim the costs against your company. You can’t simply make a cash claim for £150.

To calculate the cost per head, HMRC states that you should divide the total cost of each function by the total number of people (including non-employees) who attend.

Trivial benefits of less than £50 - upto £300 a year 

https://hrdand.co.uk/making-the-most-of-your-trivial-benefits-allowance/

This is an exemption not an allowance. The money still has to be spent. 

Grumpy_chap

Hoenir said:

This is an exemption not an allowance. The money still has to be spent. 

I have always been led to understand that HMRC take a very close view of such transactions when the situation is a one-person (or one-family) Owner-Director Ltd Co.
The advice from my Accountant has always been that it is a fairly sure-fire trigger once spotted by HMRC for a further in depth investigation into the company and personal tax affairs.

The OP's Accountant may take a different view - especially if the willingness to create alphabet shares in the OP's children's names is an indicator of willingness to push the boundaries of the rules.
I wonder what the business need to create the alphabet shares was?  Perhaps the children all had large premium bond winnings and invested in the business but not taking on Director responsibilities.

This all points to the need for the OP to take the advice of their Accountant, rather than partially informed comments from internet strangers.

terryhouse

Thanks for your comments everyone.

I was advised by two of the local large accountancy firms to set up the Limited company with that structure.  One child was over 18 at the time with 2 under 18.  Over time we will move the shares over to the kids, or that was the original plan.

The trivial gifts, events, etc was something I looked into.  But the company as such does not have any employees so was led to believe this is not possible.

I've got another meeting with my accountant soon to see what I can do before the end of the year.  I think sounding questions and queries on forums such as these provide a wealth of information and advice.  I want to arm myself with as much knowledge as possible and make informed choices. I appreciate members who are trying to be helpful and impart their wisdom.

GDB2222

terryhouse said:

Thanks for your comments everyone.

I was advised by two of the local large accountancy firms to set up the Limited company with that structure.  One child was over 18 at the time with 2 under 18.  Over time we will move the shares over to the kids, or that was the original plan.

The trivial gifts, events, etc was something I looked into.  But the company as such does not have any employees so was led to believe this is not possible.

I've got another meeting with my accountant soon to see what I can do before the end of the year.  I think sounding questions and queries on forums such as these provide a wealth of information and advice.  I want to arm myself with as much knowledge as possible and make informed choices. I appreciate members who are trying to be helpful and impart their wisdom.

 I thought directors are employed? 

However, is this a trading company? Do different rules apply to investment companies? 

silvercar

Directors could be employed, and often are at a level to qualify for state pension without incurring any tax for them or the company. Especially useful if one of the directors is not earning elsewhere. If the 18 yr old is a student and not earning (much) elsewhere, there is an opportunity to employ them on menial tasks during holiday times, in order to take advantage of the tax regime as well as supplementing their income.

Bookworm105

silvercar said:

Directors could be employed, and often are at a level to qualify for state pension without incurring any tax for them or the company. Especially useful if one of the directors is not earning elsewhere. If the 18 yr old is a student and not earning (much) elsewhere, there is an opportunity to employ them on menial tasks during holiday times, in order to take advantage of the tax regime as well as supplementing their income.

as long as minimum wage hourly rate is observed.

also, given "menial work", the rate of pay should be commensurate with the complexity of the task.
In contrast, employing family and paying them extortionate rates is "problematic".

The situation is subtly different for directors (not other employees) as they fall outside minimum wage rules hence the many instances of payment of "director's minimum" to get pension credit without having to pay any tax under PAYE rules on those earnings.

Grumpy_chap

silvercar said:

Directors could be employed, and often are at a level to qualify for state pension without incurring any tax for them or the company. Especially useful if one of the directors is not earning elsewhere. If the 18 yr old is a student and not earning (much) elsewhere, there is an opportunity to employ them on menial tasks during holiday times, in order to take advantage of the tax regime as well as supplementing their income.

I thought the OP's children were Shareholders but not Directors of the OP's Ltd Co.

silvercar

Bookworm105 said:

silvercar said:

Directors could be employed, and often are at a level to qualify for state pension without incurring any tax for them or the company. Especially useful if one of the directors is not earning elsewhere. If the 18 yr old is a student and not earning (much) elsewhere, there is an opportunity to employ them on menial tasks during holiday times, in order to take advantage of the tax regime as well as supplementing their income.

as long as minimum wage hourly rate is observed.

also, given "menial work", the rate of pay should be commensurate with the complexity of the task.
In contrast, employing family and paying them extortionate rates is "problematic".

The situation is subtly different for directors (not other employees) as they fall outside minimum wage rules hence the many instances of payment of "director's minimum" to get pension credit without having to pay any tax under PAYE rules on those earnings.

Grumpy_chap said:

silvercar said:

Directors could be employed, and often are at a level to qualify for state pension without incurring any tax for them or the company. Especially useful if one of the directors is not earning elsewhere. If the 18 yr old is a student and not earning (much) elsewhere, there is an opportunity to employ them on menial tasks during holiday times, in order to take advantage of the tax regime as well as supplementing their income.

I thought the OP's children were Shareholders but not Directors of the OP's Ltd Co.

The OPs children are shareholder. I was suggesting employing them on menial tasks would make them employees and therefore eligible for the trivial benefits which need no explanation, as well as potentially a seasonal party.