Have I set up a CICH?

Have I gone and set up a Close Investment Holding Company?

Didn't find your answer?

Hi, appreciate your help on this

It's a quick question; during COVID lockdown, 3 friends and I started pooling money every month and we'd invest it on eToro. It was all done under my name, but it was only £400 a month so we weren't too worried. Luckily, it started doing well this year and I decided to pull the plug before our profits went over the annual personal allowance for CGT. I thought it would be a good idea to register a company, get a company account with revolut, then have the company trade the shares for us and could pay 19% tax on profits (if any). We are not thinking of extracting any money via dividends etc for the long term and will put in less than £10k a year.

However, I have just read up on CIHCs and am worried we are one and subject to 25% CT? It would be great if someone could tell me if I shouldn't worry when it comes time to file my accounts and tax return.

Thanks in advance,

Replies (24)

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RLI
By lionofludesch
10th Jul 2024 19:37

[sigh]

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By FactChecker
10th Jul 2024 21:08

It's hard to know where to start ... every suggestion that springs to mind is prefaced by "Don't" and requires the ability for you to apply it retrospectively.

Aah, I've got a positive suggestion ... appoint an Accountant and take their advice!

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Replying to FactChecker:
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By Mrmarcus
11th Jul 2024 11:22

All I've done is register a company and I wanted to know when does a Ltd company become a CIHC before I open a bank account- all I can find online references property holdings, and all the articles on it seem to be from firms trying to sell their services so are deliberately vague. Part of my reason for doing this is to get the experience of registering a company and filing annual and tax returns, which I've never been exposed to as an accountant (that qualified in another jurisdiction). My only goal is to not fall foul of any laws - the money we are investing is peanuts and our trading history has been pretty bad, we spend more on our quarterly "meetings" than we actually invest.

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Replying to Mrmarcus:
DougScott
By Dougscott
11th Jul 2024 21:06

If you're an accountant I'm an astronaut.

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Stepurhan
By stepurhan
11th Jul 2024 08:46

If you have made that mistake, then it is too late now to fix it. You should have sought advice beforehand.

Whether anything can be done to mitigate your error is something you would really need to pay someone to advise on. Any solution is likely to depend on details of not just the company but the individuals involved you don't want to make freely available online.

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Replying to stepurhan:
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By Mrmarcus
11th Jul 2024 10:43

Thanks, I should have clarified - I have registered the company but we haven't opened a bank account or transferred in any money, so I was hoping to get advice here on the tax rate before I go any further. We are talking about putting in £4,800 a year so if we are lucky annual profits of about £480 so the difference in tax rates isn't too concerning, I just don't want to mislead anyone in the group or fall foul of HMRC or, worse, getting disqualified from becoming a director in future.

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Replying to Mrmarcus:
By ireallyshouldknowthisbut
11th Jul 2024 11:16

The more you type, the more messed up your situation.

You do realise if you bought the intestments in your name, HMRC will be after you for any tax?

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Replying to ireallyshouldknowthisbut:
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By Mrmarcus
11th Jul 2024 11:25

Yes, hence why I said in my post I closed our positions (in March) and returned the equal shares before our accumulated profits reached the £6k threshold for CGT in 2023/24 so I will declare it on my tax return and will not have to pay any CGT on it.

Thank you for your input, much appreciated.

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Replying to Mrmarcus:
Stepurhan
By stepurhan
11th Jul 2024 13:28

Mrmarcus wrote:
I was hoping to get advice here on the tax rate before I go any further.
See previous comment.
stepurhan wrote:
Any solution is likely to depend on details of not just the company but the individuals involved you don't want to make freely available online.
You are asking for bespoke advice with most of the relevant detail missing and other relevant facts only coming out piecemeal.

If it is worth setting up a company for, it is worth paying for advice. If it isn't worth a company, you might even get a generous accountant to tell you that in an initial fact-finding meeting.

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By Verified
11th Jul 2024 09:52

If you'd have invested in your own names, you'd have paid 20% CGT after the annual exempt amount.

Using a company, you have turned that into a 25% corporation tax charge, less personal tax (income tax or CGT) on the 75% that is left when you draw it out.

Oh dear! Hopefully the amounts involved aren't too high. Still, sounds like you should take it to an accountant to do the various filings.

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Replying to Verified:
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By Mrmarcus
11th Jul 2024 10:36

Thanks, I've only registered the company so that didn't cost much - we haven't invested anything yet so no harm done. It actually gets more complicated as not all are UK resident. We're talking small amounts of money though and it's only a reason for us to meet for a few beers every couple months to talk "business", I just don't want to end up in court for defrauding HMRC when I attempt to file an annual return and CT return for the first time. Were we to go to an accountant that was familiar with the tax ramifications in the different jurisdictions it would probably cost more than we would ever hope to make in profits, especially as we lost money in the first two years of doing this since none of us know anything about the stock market.

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Replying to Mrmarcus:
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By Verified
11th Jul 2024 12:00

Ok, well, whatever.

You make it as complex as you like and seek as little advice as you like.

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Replying to Verified:
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By Mrmarcus
11th Jul 2024 12:46

I came here for advice before we proceed with it.

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Replying to Mrmarcus:
RLI
By lionofludesch
11th Jul 2024 13:13

Mrmarcus wrote:

I came here for advice before we proceed with it.

This isn't a forum for free advice for the general public.

It's for professionals to debate technical matters and HMRC inefficiencies.

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Replying to Mrmarcus:
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By Verified
11th Jul 2024 14:08

What Lion says. Also, people haven't just dismissed you with "get advice". They have made helpful comments in good faith that, hopefully, flag up a few things that are some of the reasons for recommending that you get proper advice.

Even if anyone did try to give you a full answer on here, it isn't really possible and any tax advice would certainly be dangerously incomplete.

You've probably now reached the edge of most people's tolerance levels, so replies will start to get snarkier - as you ask more questions, reveal more info, and trot out the line we so often hear of "Oh, I will get proper advice, but I thought I'd ask a few questions here first. I'm totally not trying to DIY this."

Honestly, people are giving you the best advice in telling you to discuss this with a tax adviser. It isn't even to try to get money out of you and into the profession. We're telling you this for your own good.

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DougScott
By Dougscott
11th Jul 2024 10:05

You need professional advice my son.

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By SXGuy
11th Jul 2024 12:47

Failing to grasp why you would want to open a company pay CT on profits you make instead of keeping it all as individuals.

Are you seriously suggesting you want to pay 19p or 25p for every £1 profit you make rather than only paying cgt above the cgt threshold? Considering you've told us there's 3 of you investing. That's 3 times the allowance.

Not to mention all profits are yours to keep. Whereas a company you'll pay further tax on the withdrawal.

What exactly do you believe you are achieving or saving for that matter, by using a company?

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Replying to SXGuy:
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By Mrmarcus
11th Jul 2024 15:29

Just for fun, a way for a few old schoolfriends to have a shared project and stay in touch during their middle ages and perhaps a vehicle with decent assets in the future that could invest in something fun. But it all sounds like a nightmare and an awful idea with too much tax so I'll take the advice and we'll figure out something else to do! Thanks.

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Replying to Mrmarcus:
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By Leywood
11th Jul 2024 18:31

Mrmarcus wrote:

we'll figure out

That’s where you are going wrong. You haven’t got the knowledge and skills to sort it, so stop trying to DIY sort it out.

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By Paul Crowley
11th Jul 2024 15:16

Companies do not have a 'CGT' allowance.
All gains taxed.
Chuck the company away and let each person do his own trading.

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Replying to Paul Crowley:
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By Mrmarcus
11th Jul 2024 15:24

Yes, I think I will thanks based on the above. I was just wondering if the company would pay 19% or 25% CT given the proposed nature of the business, which I read from the above comments it would be 25%.

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Replying to Mrmarcus:
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By Tax Dragon
11th Jul 2024 15:42

Make it a competition - a bit more fun. Rather than joint-but-all-in-your-name investments, you each have £100 or whatever to invest every month and the one with the biggest* returns come beer time gets the first round in.

*Or smallest - your club, your rules.

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Replying to Tax Dragon:
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By Mrmarcus
11th Jul 2024 16:05

Haha thanks, that sounds easier alright.

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By AJACK
11th Jul 2024 21:42

Seriously, with the greatest of respect, get advice. Just because starting a company is easy and cheap, doesn't mean it is right or cheap to maintain. A local sole trader accountant could point you in the right direction without too much fee.

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