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Ltd Company and Sole Trader at same time?

Discussion in 'Legal' started by Richard1973, May 11, 2011.

  1. Richard1973

    Richard1973 UKBF Newcomer Free Member

    Posts: 23 Likes: 7
    Hi, can anyone give me advice on this.

    I am the sole Director of a Ltd company.

    I have a business idea which is completely separate with no conflict, link or crossover with my ltd company.

    I would like to set up the second business as I believe demand is present and I would like to test its viability.

    I am led to believe that to be the director of more than one ltd. company could have significant negative implications for my personal taxation.

    My question is can I be a director of a Ltd company and also a sole trader for something separate at the same time?
    I reinvest most of the money made by the Ltd company as I want to grow the business and I therefore take no dividend at the moment and minimal salary. I would look therefore look to use 2nd business to support my personal income needs in the short to medium term.

    As an added complication my ltd company is a service where turnover is below VAT threshold so does not need to be VAT registered however the other business would be subject to significant VAT on input costs and turnover would likely be above VAT threshold so would need to be VAT registered.

    Can I have duel roles like this running side by side or would it be better to set up a 2nd ltd company? Can I run 2 totally separate Ltd companies one VAT registered and one not or would it be viewed that they are one interest?

    many thanks for any assistance.
    Posted: May 11, 2011 By: Richard1973 Member since: Jan 22, 2011
  2. Richard1973

    Richard1973 UKBF Newcomer Free Member

    Posts: 23 Likes: 7
    Anyone able to assist?
    Posted: May 17, 2011 By: Richard1973 Member since: Jan 22, 2011
  3. Arch Stanton

    Arch Stanton UKBF Newcomer Free Member

    Posts: 107 Likes: 25
    As far as I am aware you can be the director/shareholder of multiple limited companies without negative personal tax implications except, of course, higher income means more tax to pay. You can also be a sole trader and a director but this may not be the best option tax wise if the sole trader business is making the most profits.

    I understand that as long as the new business is separate and distinct from your existing limited company then yes it can be VAT registered and your existing one can continue as unregistered.

    Probably best to get professional advice to ensure your business affairs are properly structured.
    Last edited: May 17, 2011
    Posted: May 17, 2011 By: Arch Stanton Member since: Jan 16, 2011
  4. fred1966

    fred1966 UKBF Newcomer Free Member

    Posts: 4 Likes: 0
    I did this for a while and survived a couple of VAT inspections. The inspector was fully aware of the non-registered company. If they are completely separate, no problem. If they have a genuine supplier/customer relationship - again that is no problem if transactions are properly accounted for. But if the separation is a sham and there is essentially one trading activity which has been split, then that's not OK.

    Don't forget stuff like if your VAT registered company pays the gas bill then it is providing a taxable (ie VATable) supply to the non-registered company if it has a room in the same building, etc.

    (PS I'm not an accountant, but I did go through a phrase of running a number of companies out of one building.)
    Posted: May 17, 2011 By: fred1966 Member since: May 17, 2011
  5. BobBuilder

    BobBuilder UKBF Regular Free Member

    Posts: 249 Likes: 23
    If the OP is a majority shareholder in more than one limited company then those companies becoming Associated may well result in higher CT payments
    Posted: May 17, 2011 By: BobBuilder Member since: Oct 25, 2010
  6. Arch Stanton

    Arch Stanton UKBF Newcomer Free Member

    Posts: 107 Likes: 25
    Yes, if the OP has two associated companies then the profits threshold, up to which the lower corporation tax rate applies, will be reduced from £300,000 to £150,000 for each company. So that will need to be considered.
    Posted: May 18, 2011 By: Arch Stanton Member since: Jan 16, 2011
  7. zerotax

    zerotax UKBF Newcomer Free Member

    Posts: 8 Likes: 0
    Okay, I'm not sure if the company that I work for would be able to assist you in any way as it's not my area of expertise but what we do is set up offshore companies for the purpose of paying less taxes.

    Anyway, if you would like more information, hit me with some questions and I will try and get you some answers :)

    Posted: May 18, 2011 By: zerotax Member since: Feb 10, 2011
  8. Anna Chandley

    Anna Chandley UKBF Ace Free Member

    Posts: 1,486 Likes: 455
    The problem with offshore companies is that if they are managed and controlled in the UK then they are subject to UK corporation tax. If the directors are all UK residents then this is hard to get around without appointing overseas directors and ensuring that all meetings etc are held outside the UK. The cost of trying to keep management and contol offshore can outweigh the benefits of reduced taxation. In any case any dividends or salary from an offshore company will be chargeable to UK income tax for UK residents.
    Posted: May 18, 2011 By: Anna Chandley Member since: Jun 2, 2008
  9. Richard1973

    Richard1973 UKBF Newcomer Free Member

    Posts: 23 Likes: 7
    Thank you for the comments so far.
    I have no problem with paying any applicable taxes for either business although I clearly do not wish to introduce unecessary tax burdens upon myself so I have no real interest in offshore business. I simply request advice as to whether I can run 2 companies and whether forum members can forsee any problems in this. The first company will provide nothing to the 2nd. They are totally different to each other. The only common factor is me. They are both my idea and I could run them both seperately. Neither of them is big so I would not expect any profits to reach 150k in either. If I did I wouldn't be exploring the 2nd.
    I'm just looking to broaden my options.

    Posted: May 20, 2011 By: Richard1973 Member since: Jan 22, 2011