Investing as Legal Entity (Company) - Legal Tax Optimization

đź“Š Investing
1

As we have investors from all over Europe (inc. UK), have you ever consider creating a company for tax optimization?

Mainly for investing, but can it even can include everyday expenses to offset the profits, such car expenses, insurances (car, home, health, life) mortgages & other credits, energy & utilities (electricity, natural gas, water, waste), furniture, home appliances, electronics, IT, other high ticket items, etc.

Using for example, the company credit/debit card to buy the stuff you need (e.g. a Rolex, or a 2nd/3rd/4th LCD for trading, or a XBOX/Playstation + 90’ 8K UHDTV for gaming, :smiley: ).
You can rent a room in your house to your company as the office/headquarters.
Even your company paying for your drinks and nights out.
And so on…

  • Legally reducing the tax bill, is a way of saving money, to invest or consume more.

  • In some countries the corporate taxes are lower than personal taxes.

  • Other advantages, includes inheritance purposes, and reducing the inheritance taxes.

Legal forms, could be creating a family trust (UK) or creating “family office” (company that manages the family assets) or a “regular” company, in your country or outside it,

It would interesting to discuss the alternatives in each country, for nationals and foreigners.

Thanks to the growing digitalization, the world is smaller, the access to foreign countries is cheaper and more democratized. All without leaving the home country.

For example, the Deloitte’s Withholding Tax Rates:

Rates are statutory domestic rates that apply to payments from a source jurisdiction to nonresident companies without a permanent establishment in that source jurisdiction.

1 Like
2

As a weekend reading, I leave an example, an Estonian company for tax optimization:

(I admit that don’t remember much about the details of this article in particular, as I had read this article and others on subject, the Estonian E-residency + Estonian company, some time ago, but I leave it for anyone interested in the subject. And I will also reread it during the weekend.)

3

I think for the UK, the ISA wrapper and 12.3k of CGT allowance does enough for most.

Is this what you do to pay the minimum tax?

4

That are “special” tax wrappers, only on UK. You also have other tax benefits, EIS/SEIS.

But they are limited to relative small amounts, and you can’t offset other kind of expenses or credit interest or other taxes besides capital gains tax, such as:

  • Withholding tax (dividends, interest, royalties)
  • Property tax
  • Car/Vehicles taxes (buy/sell tax, annual tax, etc)
  • Petroleum tax
  • Value-added tax (VAT)
  • Stamp duty tax
  • Sin & consumption taxes (alcohol, tobacco, sugary drinks/food, sugar, salty food, salt, plastic bags/packages/food utensils, gambling, batteries, tires, electronic disposal, etc)
  • Copyright tax (e.g. included in hard-drives, memory cards and other data recording devices)
  • Public broadcasting tax (Public TV & radio)
  • Inheritance tax
  • plus any tax that the Human mind could create to extort the citizens, e.g. sun tax, sex tax. :smiley:

(Rhetoric question: Just for curiosity, have you ever did your annual total tax bill calculation, income tax, property tax, petroleum tax, VAT, stamp duty tax, etc?)

5

Little off-topic, t212 doesn’t accept company accounts. :slight_smile:

ps. I made some calculations and it turned out to be unprofitable. At least for me. But I support the topic, and I’m particularly interested in how the HMRC (tax administration) reacts to a LTD that has not issued any invoices (but has incoming invoices for expenses and seeks a tax refund).

1 Like
6

there’s quite a few limitations to expenses you can list as a company expense and those that you must bear personally (living as a corporate entity in the UK) and the UK doesn’t have the favourable tax deductible system we can see over in the US.

listing the pro’s and con’s made it pretty clear it wasn’t that favourable for my current circumstances and since I can do all my investing inside an ISA I have yet to max-out once, there isn’t an immediate need to try and reduce investing related taxes.

2 Likes
7

You can’t use a company to offset normal living expenses in the UK, only genuine business expenses. HMRC take a very dim view of even excessive corporate entertainment expenses let alone trying to put non-business expenses through a business.

8

funnily I always have 4 tabs open in my browser in a business related dedicated window, one of which does a brief overview regarding allowable expenses for limited companies. I wanted to know for any particular type of business that can be formed for the sake of an individual, which would allow you the most freedoms and protections.

1 Like
9

With so much remote work in the last 2 years, the tax man/woman only allows this?

(From @Dao link)

Use of home as office

If your home is the heart of your business, you’re able to claim a percentage of your household costs and utility bills as business expenses. This cost could be claimed as a rate of £4 per week or by working out what rooms you use for your business needs and the amount of time they’re used for work purposes. You’re also able to claim the costs of lighting, heating, postage and printing costs and accountancy and legal services as limited company expenses too – as long as they’re used solely for business purposes.

1 Like
10

working as an individual has plenty of benefits if you split everything into companies, because the requirements are that company expenses must be relevant. but living as a corporate entity not so well supported. :man_shrugging:

If I wanted to do photography as a paid side job I could make a company for it, record my salaried hours, collect payments, get VAT tax returns where applicable etc, without pushing my annual income into a higher tax bracket.

IF I want that fancy new camera? it’s a company expense, I don’t need to foot the bill personally, on the premise the company can afford it in the first place and this counts as an expense against profits since you can’t work without the gear. downside is all the gear I get will belong to the company not myself. however after a few years I could possibly buy the gear I want to keep most at the depreciated value from the company in effect saving myself some money without having to delay the initial purchase and lose jobs in the meantime. the company could get better rates on lines of credit than I could as an individual thus financing a portion of the start-up or gear acquisition (only so much as I can already guarantee a stream of revenue to cover the repayments to reduce the debt)

If you have so much money that investing as a company makes sense then by all means do so, but that’s not that common and most people are better of just using their ISA allocation as an individual here in the UK.

1 Like