Newco hold via a Consultancy Biz - a problem?

[LondonSW]

Hi all,
I have a Limited that I am using to Consult in Risk and Corporate Finance (I am a former Banker).
VAT flat rate (Limited started in Feb/2016).
I own the Consultancy (Limited) personally 100%.
I am now, with an Architect/planner and construction company, setting up a Development Company.
I will own 33% of the Development company, and "dividend policy" would be to distribute dividend fully every year.
I would like to own my 33% with my Consultancy Limited. Any downside?
My understanding is that the Consultancy Limited would receive the Dividend, from the Development company (own 33%), tax free.
Only if/when, the Consultancy Limited, distribute the dividends to me, there will be dividend taxation.
Hence I would use the Consultancy Limited as a Holding/Investment vehicle on that.
Any issue or downside?
Many thanks who whoever take the time to read and answer - really appreciated.

 

[JamesComer]

Hi

From my understanding of your query, you are correct as the shareholder the Consultancy Limited would receive the dividend income. The shares it ows in Development company would be should as an investment on the company balance sheet. I also believe that the dividend received would be treated as income and subject to Corporation Tax on Consultancy Limited.

Other points to note are:

• Under the new person with significant control rules - the confirmation statement would list you as having control in Development due to your shareholding in Consultancy Limited.
• If / when the shares are sold the company would pay Corporation Tax on any gain. You would not benefit from it being subject to capital gains tax on you as an individual.

I think by the other company holding shares just makes it overly complicated when it needant be. My advice as an accountant would be to sit down with a blank sheet of paper and write down what your end goal is. Is this pay the least amount of tax? Increase the cashflow into the consultancy business? Control your personal income and personal tax? Once you have determined this, you should then work backwards to the best solution.

From the above, your accountant would be able to assist with this no problme.

I hope that helps!

James

 

[lesvatadvice]

If you remain in the FRS, I suspect any dividend income will be included in the turnover figure, thereby increasing your ouput tax. Do consider leaving the FRS.

 

[LondonSW]

It seems that corporate tax is paid once (at the Development Company) and the Consultancy Company receive the dividend tax free (not added to turnover neither).

If then the Consultancy Company distribuite dividend to shareholder (me), then tax will apply.

I read few article on that - but not 100% sure.

Going back to your question: I would like to be able to "control" the dividends I distribuite to my self, and spread them if/when needed.

I may start a Holding Company (Limited) to own 33% of Developememt biz, and other I may acquire or start-up.

I should have done that already for the Consultancy Limited and another I have etc

Thanks for your reply/interest.