Transferring funds from one company to another

[danshaw]

Hi all, hope you can help. My current accountant is being pretty unresponsive as usual.

I am currently the sole director of a Ltd company in UK (basically a one man band)

I am setting up a second Ltd company as a joint venture with a friend. We need to start paying for things and for contractors and wanted to open a bank account for the company.

My question is: Am I able/allowed to transfer money from my existing original company straight into the account of the new company. Tax-wise that seems to me (with my limited knowledge of these things) to be the best way. Do I need to be aware of anything else?

Thanks a lot
Steve

 

[qul]

your company could give the newco a loan, which could be repaid in the future, possibly with interest.

it could also buy shares in the newco and receive dividends (dividends are tax free for companies and no capital gains tax if it holds > 10% and sells the shares after at least 12 months).

you could also get your accountant to check if the newco is an associate, as this could require all the corporation tax limits to be divided by 2 (until 1 April 2015 when tax rates become unified for small/big companies).

 

[Robert Pearce]

You could also treat the transfer as you taking money out of the first company (which would reduce your director's loan account) and then you lending it to the second company (which would create a director's loan account in the new company).

If you adopted this approach, you'd have to watch out that the withdrawal didn't create an overdrawn director's loan account in the first company, as this can potentially have corporation tax and benefit in kind implications.

 

[danshaw]

Hi
Thanks a lot for the replies.

So for the purposes of right now, can I just make a simple online transfer from company 1 to company 2, and then discuss with my accountant a bit later about how that is treated/accounted for?

Thanks again