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Can my company buy stocks instead of paying me dividends?

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    Can my company buy stocks instead of paying me dividends?

    Instead of paying myself dividends from my Limited company, can I buy stocks with the company and pay myself the dividends of these?

    That way I could build passive income... and I wouldn't have to pay a lot of dividend tax and then buy the stocks personally and pay dividend tax a second time when I receive dividend on it.

    #2
    Originally posted by ujjain View Post
    Instead of paying myself dividends from my Limited company, can I buy stocks with the company and pay myself the dividends of these?

    That way I could build passive income... and I wouldn't have to pay a lot of dividend tax and then buy the stocks personally and pay dividend tax a second time when I receive dividend on it.
    But then your company is an investment company surely and subject to different tax rules or something like that...

    Comment


      #3
      Your question is very unclear (i.e. could be interpreted in several different ways), but there is no mechanism through which you can "pretend" that income to your company (e.g. on dividends from shares owned) is your own, personal, income. This should be pretty obvious. If your company owns shares, and receives dividends on these shares, that is taxable profit. Whether you, as a shareholder, extract retained profits from your company as dividends is an entirely separate issue. Any dividends you receive personally will be subject to personal taxation on dividend income.

      Also, generally speaking, it's much more tax efficient to make a capital gain on shares that you own personally, because there's an annual allowance for CGT (there's no such allowance for a company).

      Finally, depending on the scale of the investments that your company makes, it may be reclassified as a Close Investment Holding Company. Since the main rate of CT is now aligned with the small business rate, this doesn't mean a higher CT bill, but it does have other implications (e.g. for ER on capital distributions from a winding up).

      Comment


        #4
        If you really want to build a share portfolio there's two preferred routes IMO -

        1 Make company contributions into your pension, buy shares in the pension.

        2 Take dividends and buy shares within an ISA.

        Both methods are tax efficient but in different ways.
        Public Service Posting by the BBC - Bloggs Bulls**t Corp.
        Officially CUK certified - Thick as f**k.

        Comment


          #5
          Originally posted by Fred Bloggs View Post
          If you really want to build a share portfolio there's two preferred routes IMO -

          1 Make company contributions into your pension, buy shares in the pension.

          2 Take dividends and buy shares within an ISA.

          Both methods are tax efficient but in different ways.
          He could simply build the portfolio within his company. This avoids personal tax whilst you build up the investments but this would prohibit any chance of getting ER.

          This is a very long term solution, you would keep the company for as long as you hold the investments and only worth while if you intend to build a meaty portfolio of say at least £300-400K.
          "The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." Cicero

          Comment


            #6
            To be clear, there is no way here of avoiding tax, but you may defer it, a SIPP is such a device for this and is very effective since you do get 25% of the asset tax free in the end.
            Public Service Posting by the BBC - Bloggs Bulls**t Corp.
            Officially CUK certified - Thick as f**k.

            Comment


              #7
              Ask your accountant.

              If you've already asked and didn't like the answer, tough. You're already paying far less tax than a permie.
              The greatest trick the devil ever pulled was convincing the world that he didn't exist

              Comment


                #8
                Originally posted by TulipSmartGrope
                1. Stocks of which company?
                2. I personally don't think this is possible or allowed.
                3. There are better tools such as SSAS and other Tax Planning that is much more simple, clear, and legitimate.
                Again with the 'don't think'. You are an accountant, shouldn't you know? I'd ask your accountant and put something that you are sure about in your next post.
                Last edited by northernladuk; 18 April 2016, 13:25.
                'CUK forum personality of 2011 - Winner - Yes really!!!!

                Comment


                  #9
                  Originally posted by TulipSmartGrope
                  Also name calling is little childish if I may add. Grow up.
                  Hee hee. I was going to remove those as you came back to clarify the situation. I was also going to give you some feedback that you make things like the extra information clear in your posts. The 'I think' and 'I guess' doesn't inspire confidence from people reading the forum. You might know what you meant but we don't.

                  But I'm sulking now so I'll do it later.
                  'CUK forum personality of 2011 - Winner - Yes really!!!!

                  Comment


                    #10
                    Originally posted by TulipSmartGrope
                    It is always best to get a 100% understanding of any clients background, what is possible for person A may not be possible for Person B.

                    So thank you very much for the clarity but I stand by my guns on the point that it really depends on the situation.
                    I'm glad you're all friends now.

                    TulipSmartGrope - you were less than clear. There's a world of difference between "I think" on a subject you're supposed to be an expert on and "It depends on the situation". Also, if you're going to put the word "smart" into your company name, your setting yourself the challenge of never appearing less than smart - if you do, you're ripe for parody! Such parody is very unlikely to be actionable defamation.
                    Down with racism. Long live miscegenation!

                    Comment

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