Invest Instead of Paying Corporation Tax

Can I invest into assets such as fine wine/property instead of paying tax

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This is probably a silly question and I may be overthinking things.

I work as an IT contractor with a turnover of £100,000 per year getting paid for services rendered.

Regular expenses are about £50,000.

Can I invest the remaining £50,000 in an asset such as fine wine or land.

Leaving me with expenses of £100,000 and no corporation tax.

or

Will I have to pay corporation tax of 19% on the £50,000 = £9,500 meaning I can only invest £40,500 in fine wine or land?

Does it matter what I am investing in? what could I invest in to avoid paying the corporation tax? Should I be buying a flat for £50,000 and renting that out?

Replies (29)

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By thevaliant
09th Jan 2023 15:56

Your business can only claim for allowable expenses.
An investment cannot be an expense.

Thanks (3)
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By David Ex
09th Jan 2023 15:58

Never make investments for the (real or imagined) tax benefits.

Speak to an accountant about your tax affairs and an IFA about investments.

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By Ruddles
09th Jan 2023 16:01

Answering your sub-heading - "no"

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By Tom Cross
09th Jan 2023 16:01

I think you were spot on:

"This is probably a silly question"

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VAT
By Jason Croke
09th Jan 2023 16:13

Anyone would think it was self-assessment tax return month?

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By JD
09th Jan 2023 16:32

Subject to David Ex wise counsel regarding speaking to an IFA prior to undertaking any investment, you could consider employer (company) pension/sipp contributions (amount dependant on available AA) - But the tax tail should never lead the dog.

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RLI
By lionofludesch
09th Jan 2023 16:40

Bless me!

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By Leywood
09th Jan 2023 16:43

Another IT contractor looking for free tax advice!

Invest in some paid for services.

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Replying to Leywood:
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By Mr_awol
10th Jan 2023 10:18

Probably joined the 'left behind' wailing about "where is our free covid money" too

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By Hugo Fair
09th Jan 2023 16:48

Lesson 1:
It is your limited company that is faced with all those decisions (regarding profits / expenses / investments / tax / etc) - not you (the individual).
So even if it decides to try reducing its tax bill (despite the valid warnings/concerns raised by others) in the way you suggest, the wine/property/whatever would then be an asset owned by the company not you.

Lesson 2:
With all that money sloshing about, why aren't you keen to invest a tiny %age of it in taking professional advice that will definitely save you time - as well as removing the biggest routes to losing substantial sums that you seem otherwise to be contemplating.

Thanks (4)
Glenn Martin
By Glenn Martin
09th Jan 2023 17:14

Dear me people have gone easy on you here, they must be busy with tax returns.

You need some advice as tax planning needs to be done in the company year not retrospectively. Investments are not tax write offs unless you paid the £40k into your pension.

Thanks (3)
RLI
By lionofludesch
09th Jan 2023 17:23

"Will I have to pay corporation tax of 19% on the £50,000 = £9,500 meaning I can only invest £40,500 in fine wine or land?"

Yes.

Whether that investment would be wise is a completely separate issue, on which you should take advice.

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Replying to lionofludesch:
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By [email protected]
10th Jan 2023 12:45

Thanks.. really appreciate that.

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By nrw2
09th Jan 2023 17:37

You could invest your surplus £50k in crypto, and provided that goes to ~zero before the accounting year end then you may be able to expense the entire loss (provided it's realised) which could achieve the tax saving you're looking for?

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Replying to nrw2:
RLI
By lionofludesch
09th Jan 2023 17:45

Hmmm - that's the sort of advice that would need the advice I mentioned earlier.

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By Postingcomments
09th Jan 2023 18:33

I assume you have already been to the Apple shop and filled your house with just about every Apple product under the sun? That seems to be SOP for IT types who can claim the cost.

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By Postingcomments
09th Jan 2023 18:39

You can sometimes claim capital allowances on machinery - clocks, shotguns etc. Have you considered investing in things with moving parts?

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Replying to Postingcomments:
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By spilly
10th Jan 2023 00:06

Nope, revised my original comment as too contentious.

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By bettybobbymeggie
09th Jan 2023 18:58

I vote "yes".

Edit - even better idea. Invest in an accountant and if you pay them c.£50,000 they could use their magic to reduce your tax bill.

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By Wanderer
10th Jan 2023 03:02

william-AT-ostendo.io wrote:

I work as an IT contractor with a turnover of £100,000 per year getting paid for services rendered.

IT contractor with £100k of income & £50k expenses?
Doubtful that you are operating in a tax efficient way before you even start to think about investments.
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Replying to Wanderer:
paddle steamer
By DJKL
10th Jan 2023 10:49

Wonder if that £50k includes salary to self, pension payments or corporation tax as hard pressed to see how else IT contractor spends £50k pa

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Replying to DJKL:
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By Wanderer
10th Jan 2023 10:59

Or dividends! It's a DIY set of accounts.

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Replying to DJKL:
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By Hugo Fair
10th Jan 2023 11:45

Accounts probably prepared by Dionne Warwick ... you know "Trains and Boats and Planes" (possibly with a Car thrown in for good measure)!

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Replying to Wanderer:
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By petercooperuk
10th Jan 2023 13:00

Very easily done, I think. At least £10k salary to self. £30k into a SIPP. £5k on a computer, phone, hot desks, £5k to an accountant... ;-)

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By AS44NG
10th Jan 2023 18:09

"Can I invest the remaining £50,000 in an asset such as fine wine or land."

I mostly invest in copious amounts of Tim Taylor's Landlord.

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Replying to AS44NG:
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By Tax Dragon
10th Jan 2023 19:23

AS44NG wrote:

I mostly invest in copious amounts of Tim Taylor's Landlord.

At which point I imagine you start "overthinking" too.

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Replying to Tax Dragon:
paddle steamer
By DJKL
11th Jan 2023 10:31

It is considered sound business finance advice to maintain a reasonable quantity of liquid assets.

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Replying to DJKL:
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By Hugo Fair
11th Jan 2023 13:51

It doesn't sound like AS44NG's investment is being 'maintained' ... unless there is a parallel leg of the business that is focussed on recycling?

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Replying to AS44NG:
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By legerman
11th Jan 2023 14:13

AS44NG wrote:

I mostly invest in copious amounts of Tim Taylor's Landlord.

A man* after my own heart. One of the best pints around.

* Gender assumed. Insert different gender if applicable

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