Help taxes on company investment

by **barros** on Wed May 18, 2011 12:14 pm

I am joining in a company, I am going to invest £200.000, I would like to know which taxes I am liable to pay?
In case I declare that it is a gift do I have to pay taxes?
Thanks in advance

by **tax_schmax** on Wed May 18, 2011 1:20 pm

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by **Tax Champion** on Wed May 18, 2011 3:43 pm

More explanation needed - what do you mean by "joining in a company?"

by **barros** on Wed May 18, 2011 4:03 pm

Sorry for my english I need to improve it.
I have 2 friends that runs a company, I am interested in being their business partner. I am going to invest 200.000 and want know which taxes the company will have to pay after I invest this amount.

by **section 44** on Wed May 18, 2011 4:31 pm

If the company is UK resident then it will pay corporation on its profits.

If your investment is by way of making a loan to the company then payments of interest will effectively be tax deductible for the company to the extent that they do not exceed a commercial rate. Similarly, to the extent that the interest received by you does not exceed a commercial rate, you would be subject to income tax on the interest received.

If your investment is by way of holding shares then any dividends (or excess interest with regards to the above) would be out of post tax profits of the company and you would be subject to tax on such dividends (or excess interest) at the rates of income tax applicable to dividends (effectively, 25% for higher rate taxpayers and 36.1% for additional rate taxpayers).

If you are, or become, an employee or director of the company and you acquire shares for less than their unrestricted market value then you would be subject to income tax and usually national insurance contributions on deemed earned income (to the extent of such "discount"). There are other circumstances that could give rise to an employment-related tax liability in respect of shares. For example, if the shares' value is artificially enhanced.

by **barros** on Mon May 23, 2011 8:14 pm

Hi there.

thank you for reply.

However I think I haven't made myself clear.

I am going to receive 200,000.00 GBP from my mother ( extra communitary Tax Resident ), as GIFT, then I will buy company shares from an existing UK company.

Could please clarify if I will need to pay income tax on the Gift received?

Please note I lived in UK since Sep/2005 and I do not have a EU residence.

Thanks in advance.

by **section 44** on Tue May 24, 2011 10:09 am

barros wrote:Could please clarify if I will need to pay income tax on the Gift received

You will not pay income tax on this gift.

by **barros** on Wed Jun 08, 2011 12:29 pm

Thank you for your reply.

So I will not have to pay income tax on this gift.

Is there any other tax which I or the company will have to pay in the next tax year relative to this investment £200k?

thanks in advance

by **Generix** on Wed Jun 08, 2011 2:16 pm

barros wrote:Thank you for your reply.

So I will not have to pay income tax on this gift.

Is there any other tax which I or the company will have to pay in the next tax year relative to this investment £200k?

thanks in advance

You need to be more specific.

Do you mean is there any tax to be paid in respect of JUST the initial investment of £200k by the business and/or the individual.

Or do you mean what taxes will have to be paid once you start earning income in whichever form it takes.

On the flip side, would you REALLY be comfortable gifting cash to a business? And moreover if you are going to be earning income from it in the future, I don't think the authorities would accept that it is a gift, though this is not my area of expertise I'm fairly confident that if you claim it to be a gift and then later receive 'gifts' of income the business then there is some anti-avoidance legislation (at the very least) to stop this all being tax free.