Composers trading through Limited Company
New client trades through a limited company and has done for a number of years.
Income is derived from composition of music for film and television and the company is currently owned 60/40 between the husband and wife.
All contracts are between the company's clients and the company itself.
At first I felt the structure was safe but my concerns have started to grow from reading a few unspecific threads concerning authors and royalties that "could" in theory impact on the chosen trading vehicle.
The ultimate plan has been to shield profits from higher rate tax and only draw from the company monies which are required from year to year. However profits are now rising to the point that the company is doing very well and the shareholders are both breaching higher rate tax.
Other than the Arctic Systems issues which always lurk in the background but are not necessarily a concern right now I can see that it is highly unlikely that the company can be liquidated in the future and the profits be drawn under CGT benefiting from Entrepreneurs Relief (although income is derived from a combination of fees and royalties - probably 40/60 in favour of royalties now).
One point I would make (in case it is relevant) is that no capital payment was claimed on incorporation of the business.
Part of the plan had been that in years to come the shares could be passed to children etc and that they benefit from the income stream by drawing dividends until at some point the coffers run dry.
Firstly could HMRC challenge the trading structure of the limited company due to the trade?
Is the 60/40 share split safe (the wife deals with the admin of the business but the husband writes the music)?
Any other thoughts/comments - particularly as this is a case concerning royalties?
Responses will be most welcome!!
- Xerocon 2016 1,024 24
- Entrepreneurs' Relief upon sale of a cash rich company 2,193 41
- buying asset and settling vendor's debt 244 6
- Posting invoices with balance brought forward 270 7
- HMRC now overriding SA bank repayment details on tax returns 606 12
- Personal Tax 509 11
- USA Tax Query 184 1
- Disengagement Help! 1,662 25
- Is HMRC Basic Tools basically wrong? 946 6
- Expenses paid by director (the comapny owner) 306 2
- Write an article on latest tax changes for landlords. 604 18
- Corrupt Excel File 675 10
- Website costs (intangible assets) tax relief 355 4
- Is Xero payroll as rubbish as I suspect it is? 1,982 43
- Locked Out of HMRC Online Account - HMRC Not Responding 290 2
- Re-Training costs - tax reief 419 7
- Capital Gain on Share Disposal with Held Over Gains 184 1
- 64-8's amazingly quick 352 4
- last minute request 528 5
- VAT - Check on clients business 1,256 46