I think I know the answer to this, but it is ok for somebody to use company money to buy shares and then recognise the gains/losses from the shares in their accounts rather than declaring it as a director's loan?
I think I know the answer to this, but it is ok for somebody to use company money to buy shares and then recognise the gains/losses from the shares in their accounts rather than declaring it as a director's loan?
Replies (21)
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Companies are permitted to buy shares. Company as shareholder.
Zzzzzz,,
Thanks.
Thanks.
Thanks.
It's a legal question. IANAL. But Sainsbury's owned shares in Homebase, sold those shares to another company and recognised the profit in its accounts rather than declaring it as a director's loan. (That would have been a weird thing to do. I can't actually imagine how that could have happened.)
And if Paul tells me I shouldn't draw general conclusions from a specific case, I'd tell him to f.... actually, no, I'd applaud him :-).
If companies could not own shares there could not be group relief.
(Duplication this time caused by a crash while posting the first time. Was that me or Aweb?)
Nor SSE. Nor VAT group registrations. Nor nor nor. (In fact, huge chunks of the tax code could be binned. Why did the OTS never think of this?!)
I'm still not a lawyer.
Cheers, it’s more a case of a director using company money to do a bit of stock trading and so whether to recognise the stocks in the company or say that he withdrew the company and recognise the gains in his own name. Think I’m happy to leave it in the company.
If the company owns the shares then the company should have a broking account which requires getting a legal entity identifier. I am not sure this can be done on a form of trust/agency basis. The company also would then potentially be an investment company (although this aspect of law is complex).
It does seem to raise masses of questions in terms of tax and securities law.
There are of course potential tax implications for the shareholders of the company purchasing these investments vis a vis availability of future Business Asset Taper Relief if they later decide to wind down their own company., the investments could change the status of the investing company's shares re the availability of the relief.
There are also potential Business Property Relief implications regarding Inheritance Tax (though not so all or nothing)
The client needs to be made aware of these before acting, preferably in writing, to avoid future issues with them if either comes into play in the future and they become litigious.(You did not warn me etc)
"Business Asset Taper Relief" - which decade are we in. Have I missed something?
Read Disposal not Taper, its an age thing.
Duplicate
Who, apart from the gambling director, owns the other company shares?
That would be my first question.
Who is looking to keep the profits (or bear the losses) would be mine.
Surely it would be more tax efficient for the director to own shares (CGT allowance, ISA allowances etc...).
A company can purchase shares but there are a lot more hoops to jump through.
Yeah, I did try to explain to him that it’s quite a complicated issue as he was pressing me on the phone about it. I don’t really know what to advise as he’s already used to company money to do it, but I believe the trading account is in his own name and that was why I asked about whether the money would be director’s loan or it would be an investment through the company. He is the only shareholder, so there isn’t an issue there, I just need to get my head around how best to account for it!
If the shares are in his name, then he's borrowed company money to buy them, and so DLA is in point.
Nothing to get your head around
Company paid money in to the director's personal account
If successful tax is better with CGT on the director anyway