Money between two companies

I have one main company and one popup, the main company needs a loan paid off

Didn't find your answer?

I have one main company fully taxed and above board with up to date accounts.

I have a second company which I use for popups, I just started it this year and plan to file paperwork as required for legal and tax purposes.  

 

However I do not expect to reach the threshold of anywhere near £80,000 more like around £50,000

 

The popup business will be far more profitable in a percentage sense with around 20x less revenue.

 

I have a £20,000 business loan for the larger company and id like to pay it off using funds from the popup company.

The popup company had originally operated as part of the larger company, I thought about selling the business to the new company as much of it is still part of the larger business.

Would that work legally for £20,000?

 

What are the tax implications as the smaller company will not be due any VAT payments this year.

 

Alternatively a loan from the smaller company to the bigger company, must this be repaid?

 

Clearly I am trying to avoid paying tax on funds raised which were initially not due to be taxed.

 

Any help greatfully received.

Replies (42)

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By Ruddles
13th May 2024 09:42

"Clearly I am trying to avoid paying tax on funds raised"

Clearly you are also trying to avoid paying for accounts/tax advice.

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Replying to Ruddles:
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By Twocompsonedream
13th May 2024 09:52

I have an accountant.

This forum is for advice.

Cheers for your passive comment anyway.

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Replying to Twocompsonedream:
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By Leywood
13th May 2024 09:57

Twocompsonedream wrote:

This forum is for advice.

<

No it isnt.

Read the rules!

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Replying to Twocompsonedream:
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By David Ex
13th May 2024 10:13

Twocompsonedream wrote:

I have an accountant.

This forum is for advice.

https://www.accountingweb.co.uk/any-answers/how-to-use-any-answers

“If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.”

“They are not here to provide free accounting advice.”

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Replying to Twocompsonedream:
By Ruddles
13th May 2024 10:35

OK - here is my advice. Go and ask your accountant.

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Replying to Twocompsonedream:
RLI
By lionofludesch
13th May 2024 10:55

Twocompsonedream wrote:

I have an accountant.

This forum is for advice.

Cheers for your passive comment anyway.

[chuckle]

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By paul.benny
13th May 2024 09:42

What does your accountant say to this?
Or don't you have one?

I'd recommend you rectify that at once. For a start, your new accountant will tell you that your two companies are likely associated for VAT meaning that the registration threshold is based on the combined turnover.

Your new accountant may appreciate having two lots of fees for two companies. But you might not welcome doubling of costs as there's no obvious reason for dividing your business in two.

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Replying to paul.benny:
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By Twocompsonedream
13th May 2024 09:55

Hello, thank you for your response.

I do have an accountant, they handle my larger company and as above everything is very much above board.

I wasn't aware of the joint implications of limited companies, I asked here first as to seek impartial advice from a group hivemind before approaching my accounts.

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Replying to Twocompsonedream:
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By Leywood
13th May 2024 09:58

If you want additional impartial advice, pay for it.

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Replying to Twocompsonedream:
By ireallyshouldknowthisbut
13th May 2024 10:11

I find when people say

Twocompsonedream wrote:

everything is very much above board.

it really, really isnt.

Just an observation.

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Replying to ireallyshouldknowthisbut:
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By Tax Dragon
13th May 2024 10:21

I call it Gertrude Syndrome.

Though that's probably unfair on Gertrude.

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Replying to Tax Dragon:
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By Paul Crowley
13th May 2024 10:50

Did you know a Gertrude?
Good choice through, as there are probably not many Gertrudes.

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Replying to Paul Crowley:
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By Tax Dragon
14th May 2024 21:23

Hamlet's much misundertood* mum.

* https://youtu.be/3wwD8mu9Lgw?si=1K6Jx4o4cS0YlJ1W

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Replying to Twocompsonedream:
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By paul.benny
13th May 2024 10:37

Twocompsonedream wrote:
...I asked here first as to seek impartial advice from a group hivemind before approaching my accounts.

And what do you expect to get from enquiring of people who may or may not have appropriate qualifications or experience and certainly don't have the full picture?
You stand every chance of getting answers based on partial information that your accountant then has to waste their time and yours explaining why the answers are wrong.

And your accountant will be impartial - they're certainly not going to recommend a course of action just because it generate a bit of extra fee.

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Replying to Twocompsonedream:
By Ruddles
13th May 2024 10:39

Twocompsonedream wrote:
I asked here first as to seek impartial advice from a group hivemind before approaching my accounts.

Are you concerned that the advice from your accountant may not be impartial?

EDIT: beat me to it, Paul

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Replying to Twocompsonedream:
Stepurhan
By stepurhan
13th May 2024 11:44

Twocompsonedream wrote:

I wasn't aware of the joint implications of limited companies, I asked here first as to seek impartial advice from a group hivemind before approaching my accounts.


You aren't the first person to come here saying they are seeking impartial advice. My question when people say this is why? Why do you not want advice that is formulated to get you the best result within the law? What benefit do you expect "impartiality" to give you?
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Replying to stepurhan:
By Ruddles
13th May 2024 11:50

stepurhan wrote:

You aren't the first person to come here saying they are seeking impartial advice.

Yep - just the latest in a long line of people claiming to want to be better-informed before speaking to their own advisers. Aye, right.

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By Paul Crowley
13th May 2024 10:43

VAT and business splitting is the conversation you need to have with your accountant, one that you should have had before starting to trade with the new company.

The VAT people take it quite seriously
That is a consideration that you already have.

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Replying to Paul Crowley:
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By Twocompsonedream
13th May 2024 12:32

Thank you

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Replying to Twocompsonedream:
DougScott
By Dougscott
13th May 2024 13:06

Yes, it's called tax evasion.

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Replying to Twocompsonedream:
DougScott
By Dougscott
13th May 2024 13:08

Ask your accountant directly, in writing, whether the pop-up should be VAT Registered if the main company is. See what they say.

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RLI
By lionofludesch
13th May 2024 10:47

Can I just ask this?

Why have you set up a company which you now want to sell to your original company?

Is it your idea? If so, what was your reasoning?

Did you ask your accountant? If no, why not?

If yes, did he laugh before replying?

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Replying to lionofludesch:
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By Twocompsonedream
13th May 2024 12:32

It's a separate business. No he didn't laugh, he gave sound advice.

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Replying to Twocompsonedream:
By Ruddles
13th May 2024 13:13

So why not ask him for some more sound advice?

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Replying to Ruddles:
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By Twocompsonedream
13th May 2024 13:17

See below.

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Replying to Twocompsonedream:
RLI
By lionofludesch
13th May 2024 13:43

Twocompsonedream wrote:

It's a separate business. No he didn't laugh, he gave sound advice.

Still not sure what the pop-up business sells. It's noted that you've been coy about that vital detail. Withholding information like that is likely to make anything you've gleaned from here completely worthless.

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Replying to lionofludesch:
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By Twocompsonedream
13th May 2024 13:52

Ok, think i've got all i can out of this thread, hence the see below, thread closed. Cheerio.

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Replying to Twocompsonedream:
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By Paul Crowley
13th May 2024 15:46

Thread is not easily closable
Given that this forum is for the benefit of all, it does not die when you lose interest. That very statement is likely to get a bit more traction.
It sits in perpetuity for the benefit of others who may have a similar or related questions.

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VAT
By Jason Croke
13th May 2024 11:20

Not sure I understand the definition of "pop-up" other than it is a company and trading.

It's impossible to give anything meaningful here without detail, but an initial observation is the "pop-up" was part of the main company and then spun-off and the pop-up isn't VAT registered, so are you confident that the "pop-up" cannot be linked to the main company under the VAT dis-aggregation rules?

If you have an Accountant, it really is best to chat this through with them as they will have all the facts and can see the bigger picture, it's never a good idea to try and isolate what may appear a simple question from the wider surroundings nor is it good to be seeking a straight yes or no answer where it involves tax as whilst the end answer may well be "yes" or "no", it is how you get to that answer that matters most.

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Replying to Jason Croke:
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By Twocompsonedream
13th May 2024 12:31

Thank you, by far the best response here which actually helped. I have sought advice today and my accountant cleared things up. He has no real concerns with what I am doing which is...

Company A trades as the pubs with everything going through one set of accounts as has been the case for years.

Company B is a popup company and separate entity which trades uniquely and can lend money to Company A if I should wish to do so, both companies liable for tax OBVIOUSLY but company B will only pay corporation tax on annual profits due to not being VAT registered as well below the threshold.

All will be accounted for under self assessment.

I didn't explain things well in my initial message here, but I am not looking to avoid tax as such, just to be economical with things.

Thank you all who tried to be helpful, thread closed.

Thanks (1)
Replying to Twocompsonedream:
By Ruddles
13th May 2024 13:17

Twocompsonedream wrote:

Company A trades as the pubs with everything going through one set of accounts as has been the case for years.

company B will only pay corporation tax on annual profits due to not being VAT registered as well below the threshold.


Hmmm

Quote:

All will be accounted for under self assessment

Hmmm (2)

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Replying to Ruddles:
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By Leywood
13th May 2024 14:09

Chuckle

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By JCresswellTax
13th May 2024 14:15

1. the additional information you provided has made things even less clear.

2. The fact you keep saying the main is company is 'above board' but you make no such comments about company 2 suggests that company is not 'above board'.

Thread closed.

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Replying to JCresswellTax:
VAT
By Jason Croke
13th May 2024 14:23

Yes, I did note the lack of reassurance for Company B and as another poster has stated, when a client tells me that everything is "above board", it tells me that there is something "below deck" they don't want me to enquire into.

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Replying to Jason Croke:
Routemaster image
By tom123
13th May 2024 18:31

Above board comes from Tudor England. The farmhouse kitchen table was on trestles.

The lord of the manor paid his workers by placing money on the board - hence "open and above board".

The table at the side was also the sideboard, and this is also where we got boardroom from.

As the trestles were moveable, we also couldn't put our elbows on the table for risk of tipping them over.

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Replying to tom123:
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By I'msorryIhaven'taclue
15th May 2024 08:22

Here on Aweb we leave no stone unturned!

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By Matrix
13th May 2024 14:16

The loan would be after tax obviously.

You have asked for impartial views and about 10 of the most helpful online accountants have said that you most likely have a VAT issue. So maybe get a proper paid for opinion from a VAT specialist.

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VAT
By Jason Croke
13th May 2024 14:16

"Company A trades as pubs".... (noting the plural suggesting more than one pub).

"Company B is a popup company and separate entity which trades uniquely".... (still don't know what the pop-up is, what it does and what "trading uniquely" means, we do know it was part of the original pub business before it "popped out" to be something uniquely different but equally could have existed where it was).

"All will be accounted for under self assessment."....(self assessment suggests personal tax so what has personal tax got to do with B lending money to A?).....earlier you refer to Company B being a pop-up and can lend money to A "if you decide so"....You as a person is not the same as you as the Director of Companies A and B, the Director has a fiduciary duty to the Company, so if you lend money knowing there is a risk, then you as a person could be banned from being a Director.

Artificial splitting of trades is not uncommon in the pub sector (wet sales split from food) but usually leads to big risks... but if OP has now spoken with their Accountant and their Accountant is fine with it, then indeed the thread can be closed.

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Replying to Jason Croke:
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By FactChecker
13th May 2024 18:03

... hope it stays buried - and that none of the pubs is called "The Dead shall Rise".

Oh, not that kind of popup then? Thought it might be another zombie business!

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By bettybobbymeggie
13th May 2024 19:31

Today was a dull day generally and I didn't sleep well last night so I've been tired and irritable but this thread has proper cheered me up. Thanks OP!!

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the sea otter
By memyself-eye
14th May 2024 15:41

Maybe Company 'B' sells toasters - they're usually 'pop up'

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By I'msorryIhaven'taclue
15th May 2024 08:24

I'd deduced that company B sells internet advertising. I could be wrong.

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