Investing in a Ltd Company

[pen2670]

I am in the process of starting up a business and have some money currently sitting in a simple Bare Trust for my benefit. I like that it’s within the remit of the Trust as it keeps it separate from my day to day money and whilst it’s there if I really need it being in the Trust makes it harder to access and so less likely to dwindle away on day to day expenses.


However, the interest rate is terrible and the amount on its own isn’t life changing. So we came up with the idea of starting a business, researched options and came up with something that we hope will work.


So my question is would it be possible to keep the money within the remit of the Trust whilst investing in the new business as an investment in the same way as it could be invested in a bond / shares, etc? Sounds simple in theory for my Trustee to invest in the business so the main shareholder would be the Trust and dividends would be paid into the existing account in the same way as interest is now.


BUT is this possible in reality without breaking any rules or invalidating the Trust? (Very simple set up at the moment with Deed of Trust in place stating that the money is for my benefit, naming the Trustee and stating that I can revoke it at any time).


Many thanks
Penny

 

[Mitchells Bristol]

Hello Penny

Yes - it is possible, in theory, for a bare trust to be a shareholder in a limited company, although I think the benefits of doing this are minimal. Certainly there is nothing to be gained from a tax perspective.

It sounds as though there is nothing within the Trust Deed to prevent the acquisition of limited company shares. Presumably, you are already filing self-assessment tax returns to declare the income you receive and so are comfortable with that side of things.

In my opinion, unless you have a particular desire to conceal your ownership of the shares, then it may just be more straightforward to draw the money out of the Trust and invest into the company directly.

Hope this is of some help.