Should I setup a ltd company to hold my shares?

I would like to setup a company to receive dividend income, giving me control over when I draw it

Didn't find your answer?

I am a 30% shareholder in the company I work for, for which I am a director. I get paid a decent salary and a yearly dividend but this puts me way over £100k taxable income which I am keen to avoid for various reasons.

Would it be legal to setup my own limited company of which I am the only director and shareholder, and transfer those 30% of shares to the company? From there I would control when and how much I draw down as dividends to myself. I would have the backing of the other directors/shareholders to do as I see fit. The money left over I don't draw down as dividends I would seek to invest it within the company (stocks and shares for example), i.e. that would be the purpose of the company.

I assume the payment of dividend to the new company wouldn't then reattract corporation tax to the newly formed company? And I assume I can transfer these without penalty as they are from me to a company owned solely by me?

Any advice would be really appreciated.

Replies (45)

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By David Ex
05th Mar 2024 19:24

gtc24123 wrote:

Any advice would be really appreciated.

Accountants don’t work to be really appreciated, they work to earn money like you presumably do.

You need an accountant.

https://find.icaew.com/

Other professional bodies are available.

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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By gtc24123
05th Mar 2024 19:27

If what I am proposing makes theoretical sense of course I will seek to appoint an accountant. But this is just my idea at this stage, hopefully someone kindly will take a minute to say you’re in the right direction or this will not work at all.

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By paul.benny
05th Mar 2024 19:27

gtc24123 wrote:
Any advice would be really appreciated.

Advice
1 Don't make assumptions where tax is concerned. Consult an appropriately qualified professional who can take account of your full circumstances.

2 Don't rely on unknown people online. An appropriately qualified professional not only has the skills but you have comeback if they give you bad advice.

3 Bear in mind that schemes providing short term tax-savings can often store up bigger tax costs for the future.

4 Legal doesn't necessarily mean wise. Or tax efficient.

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By gtc24123
05th Mar 2024 19:29

I was hoping to get general advice before appointing an accountant, especially if the idea simply will not work for whatever reason

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Replying to gtc24123:
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By Leywood
05th Mar 2024 19:36

Pay for advice. Stop expecting accountants and tax advisors to give you free advice

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Replying to Leywood:
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By gtc24123
05th Mar 2024 19:39

Had an idea, posted it on a site I’ve browsed before to gauge if it’s sensible or not, everyone’s so helpful and friendly thanks for taking the time to reply

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Replying to gtc24123:
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By Leywood
05th Mar 2024 19:36

Pay for advice. Stop expecting accountants and tax advisors to give you free advice, this is not what this forum is for!

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Replying to Leywood:
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By gtc24123
05th Mar 2024 19:44

You say this like I’ve been here before, I simply had an idea and thought I’d ask if it was feasible. In all the time everyone’s taken to say the same thing nobody has commented about the question at all. Strange bunch and so welcoming to those less clued up.

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Replying to gtc24123:
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By paul.benny
05th Mar 2024 19:37

You said that already and haven't yet shown any appreciation to me or David - just pouted a little.

I'm sure your company has an accountant. If you want "general advice", you could run the idea past them. In fact they are probably the best people to appoint as they already know you.

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Replying to paul.benny:
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By gtc24123
05th Mar 2024 19:41

I’m so grateful paul and david, such invaluable gatekeepers of the accountancy industry. Have fun on the accountancy forums at 7:30pm at night guys.

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Replying to gtc24123:
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By Leywood
05th Mar 2024 19:45

Oh now you are playing to a type. One that this forum sees often.

Surely you read the rules before joining.

Besides the advice given is the most appropriate, especially when folk ask the wrong questions.

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Replying to Leywood:
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By gtc24123
05th Mar 2024 19:48

Why even bother to reply if you don’t want to answer the question? And I’ve met plenty of your type before my friend.

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Replying to Leywood:
stonks
By WinterDragon
05th Mar 2024 20:56

Leywood wrote:

Surely you read the rules before joining.

I'm on the punter's side for this one, do you read the app store's terms and conditions before downloading apps onto your phone - I certainly do but then again us accountants are a weird bunch.

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Replying to gtc24123:
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By paul.benny
05th Mar 2024 19:58

I've given you advice, which is what you asked for. It may not be the advice you wanted but it is based on a careful reading of your post.

And as David said in the first response, accountants work for money, not just appreciation. As presumably do you.

So since you don't seem to like my advice (you don't have to like it but it doesn't mean it's not sound advice), I'm out.

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Replying to paul.benny:
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By gtc24123
05th Mar 2024 20:01

You’re out… after taking the time to post a few useless replies. Ok so sorry to see you go you have been invaluable.

As if I’m not going to get an accountant if this has mileage.

You have fun on here pal would love a beer with you one day….

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Replying to gtc24123:
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By FactChecker
05th Mar 2024 21:17

You reckon that would be mutually enjoyable?

You don't seem to be listening ... it's not that we're all avaricious or even mean; just that (a) you're asking the kind of question that depends on a lot of factors unknown to us, and (b) you already have access to someone who knows you and your businesses situation.

So from our point of view there's no merit in writing copious dissertations on arcane aspects that may not apply to you ... and from your point of view you're in the wrong place!

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Replying to FactChecker:
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By gtc24123
05th Mar 2024 21:26

Baffles me why you’ve bothered typing all this out. Just ignore it.

I am here to listen to anyone that wants to answer/comment on the specific points I’ve raised, not accountants getting all hot under the colour someone appears to be asking for effectively a handout, or *shock horror* hasn’t read the forum rules.

As a child of the internet this is the strangest interactions I’ve had on message boards.

For what it’s worth I asked this in another place and got a helpful reply from a partner in an accountancy firm, non judgmental and gave me a few things to think about - seek advice on. Sound guy and it’s appreciated.

But you lot…. All I can say is I hope you all enjoy yourselves here.

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By Tax Dragon
05th Mar 2024 20:31

gtc24123 wrote:

hopefully someone kindly will take a minute to say you’re in the right direction or this will not work at all.

It works on some levels not on others.

Which is pretty much what paul.benny said; I agree with the rest of his advice too.

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Stepurhan
By stepurhan
05th Mar 2024 21:22

The setup you suggest might achieve some of your goals. There are potentially other ways of achieving your goals that are simpler. There are potentially other goals that you haven't even considered in asking this question that this would affect. Only someone that knows the details of your personal circumstances, such as a paid-for adviser, would be able to tell you what is best for you.

There you go. I have told you that what you are suggesting MAY make theoretical sense. Time to appoint an accountant that will be able to confirm if it is a good idea for you specifically.

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Replying to stepurhan:
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By gtc24123
05th Mar 2024 21:27

Thank you really appreciate that

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By DKB-Sheffield
05th Mar 2024 21:29

My thoughts on your questions...

Should you? No idea, and can't possibly comment
Legal? Likely
"Reattract" CT on dividends? Possibly not
Penalty? What penalty did you have in mind...?

Now... I think that has 'helpfully' responded to your questions. They may be the right answers, they may be garbage (likely are). However, those may not even be the questions you should be asking. You may wish to consider all of the tax consequence of your actions... not just today's impact on income tax.

Still, at £100K+ income (which I'm not), you should be able to afford professional assistance. I am in full agreement with others on this!

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Replying to DKB-Sheffield:
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By gtc24123
05th Mar 2024 21:33

Thank you.

By penalty I mention capital gains tax I suppose in transferring the shares.

I agree on professional assistance and that’s always where this would head as stated earlier. This post was merely sounding out an idea before going there - don’t want to look stupid in front of an accountant by bringing a waste of time non-starter idea to the table.

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Replying to gtc24123:
paddle steamer
By DJKL
06th Mar 2024 09:40

What , if anything, does it do re CGT and future BADR claims also may need addressed. I might also want to consider future IHT issues and of course frictional costs selling to the company.

Others have said it but you do not like the advice, speak to an accountant whose PII is on the line if he Fs Up, taking snippets from here is dangerous.

Also nobody goes to a doctor with the medical cure they believe might work and asks for his or her opinion, they go to a doctor with an issue and he advises the solution, you really ought to approach accountants in the same way, go to them with,

"These dividends I receive are making my HR tax a bit high, what can I do about this" .

Much better approach than "Well, what about taking the foot away as my ingrown toenail is sore" approach.

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By frankfx
05th Mar 2024 21:41

Your question raises more questions, before a helpful answer, or even sign - posting, can be provided.

The quote below, not a fee quote, gives you a hint of the task ahead for an accountant on this forum.

"There are known knowns.

These are things we know that we know.

There are known unknowns.

That is to say, there are things that we know we don't know.

But there are also unknown unknowns.

There are things we don't know we don't know".

Donald Rumsfeld

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Replying to frankfx:
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By gtc24123
05th Mar 2024 21:46

I hope for your sake this was a copy and paste and you had fun contributing

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RLI
By lionofludesch
05th Mar 2024 21:41

Another satisfied customer.

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Replying to lionofludesch:
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By gtc24123
05th Mar 2024 21:46

Getting some of you lot all riled up has been most satisfying yes

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Replying to gtc24123:
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By FactChecker
05th Mar 2024 22:02

Glad to have brought a little satisfaction to those in need.
[But please don't give out references to your mates - goodwill is limited]

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Replying to FactChecker:
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By lionofludesch
05th Mar 2024 22:11

Don't tell me there's goodwill involved!

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Replying to lionofludesch:
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By gtc24123
05th Mar 2024 22:14

Accountancy banter, nice

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Replying to gtc24123:
DougScott
By Dougscott
05th Mar 2024 22:40

gtc24123 wrote:

Accountancy banter, nice

There are some very weird and some very rude people on this forum. I think to be an accountant you need to be somewhere on the spectrum and have poor communication skills (I include myself) but I do like to help people if I can. In simple terms there is nothing wrong or silly about your idea but, as others have mentioned, it may or may not be the best way of achieving your desired outcome depending on your other circumstances. You haven't told us about your pension plans for example.

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Replying to Dougscott:
stonks
By WinterDragon
05th Mar 2024 22:43

Dougscott wrote:

I think to be an accountant you need to be somewhere on the spectrum and have poor communication skills

Somehow I doubt this will make it onto Aweb quotes of the year 2024.

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Replying to WinterDragon:
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By Paul Crowley
06th Mar 2024 01:07

We are all apt to comment on Spectrum Pursuit Vehicles

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Replying to Dougscott:
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By DKB-Sheffield
05th Mar 2024 22:54

Dougscott wrote:

You haven't told us about your pension plans for example.

To which my answer would be that a discussion with a suitably regulated person may be advised.

Of course, you may be a suitably regulated person who is able to provide investment advice, but I ain't.

Perhaps that question is more suited to IFAWeb though.

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Replying to Dougscott:
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By gtc24123
05th Mar 2024 22:57

Thanks good to hear in principle it may be ok.

My desired outcome really is more control and focusing on short and medium term goals.

Currently I salary sacrifice around £40k per annum into workplace pension and sipp. This is my long term goal and seems I’m more than on track on this front.

I have a mortgage at very low interest rate for a couple more years I’ve not paid any attention to.

But my setting up a company in the way I describe I hope to control when I go over £100k, for example to clear my mortgage, and to not have all my money tied away only in pension - which I would inevitably do otherwise with my current dividend payments as thing stand.

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Replying to gtc24123:
stonks
By WinterDragon
05th Mar 2024 23:21

Thank you for providing this extra context, armed with this knowledge I can be fairly confident in suggesting that a dividend waiver will be suitable for your purposes of preventing your income from surpassing £100k.

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Replying to WinterDragon:
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By gtc24123
05th Mar 2024 23:25

Wow we’re all so funny on here

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Replying to gtc24123:
RLI
By lionofludesch
05th Mar 2024 22:53

Just waiting for the flounce-off now.....

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Replying to lionofludesch:
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By gtc24123
05th Mar 2024 23:02

Maybe you’re the one that should log off for a bit pal…. Your post history suggests so anyway

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Replying to gtc24123:
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By Paul Crowley
06th Mar 2024 01:13

That's the way to do it.

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Replying to Paul Crowley:
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By FactChecker
06th Mar 2024 01:26

The original Punchline ... highly apposite for this knockabout merchant.

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Replying to gtc24123:
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By FactChecker
06th Mar 2024 01:31

"Your post history suggests so anyway" viz ... https://www.accountingweb.co.uk/profile/lionofludesch

Good to see those numeracy night-classes weren't a waste of time.

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By nrw2
06th Mar 2024 09:02

Without knowing all the facts:

- Depending on the value of the shares, you'd likely want to seek clearance for a share exchange rolling the base cost into the new shares to avoid a dry tax charge now
- Stamp duty @ 0.5% would likely be due on the share exchange
- A company should be able to receive dividends without paying corporation tax
- If a company holds >10% of a trading company for >1 year it may qualify for SSE on the eventual disposal, avoiding corporation tax

Lots to run through with your accountant!

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Replying to nrw2:
paddle steamer
By DJKL
06th Mar 2024 09:50

If Holdco owns 30% of trading company what happens if someone comes along offering millions for the trading company's shares would be my concern, would BADR bite re Holdco shares given only 30% of Trade Co shares held? (Less than 50%)

https://www.accountingweb.co.uk/any-answers/entrepreneur-relief-and-hold...

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A Putey FACA
By Arthur Putey
06th Mar 2024 14:30

Bit late to this one but as the budget is the usual tedium, did the OP mention whether he was party to a shareholders agreement that might impose restrictions on him even thinking about it?

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