Moving money between companies
Discussion
I'll try and keep this simple. I have two companies - A & B. Myself and my partner own company A (1 share each). Company B has 3 shares issued, one to another of my partners, and the other 2 are issued to company A.
A trainee accountant friend of mine said that it was possible to move money tax free from B to A by way of dividends. Is this true? Is it possible to move money the other way as well? Is this the best way of doing it, or is there a way not involving dividends?
Any help much appreciated.
A trainee accountant friend of mine said that it was possible to move money tax free from B to A by way of dividends. Is this true? Is it possible to move money the other way as well? Is this the best way of doing it, or is there a way not involving dividends?
Any help much appreciated.
Transfer pricing - it's when prices are charged for goods or services between departments of the same company or related companies. It's common practive between large firms so that they can avoid paying tax.
It's a subject I touched briefly on in Uni but is a big deal - there are lots of laws govering it (obviously) so if you look into it further and like what you see then talk it through with your accountant. Price Waterhouse Coopers have a special Trasfer Pricing branch to help you save taxes.
It's a subject I touched briefly on in Uni but is a big deal - there are lots of laws govering it (obviously) so if you look into it further and like what you see then talk it through with your accountant. Price Waterhouse Coopers have a special Trasfer Pricing branch to help you save taxes.
Sorry, I don't think I made myself totally clear. I don't want to move the money with the specific intention of saving tax. The purpose is so that if company B makes money, I can move some of it to company A to invest in some other way - i.e. in a way not related to company B. Does that make sense?
Doubt it. I'm not an accountant, but I did learn a tiny bit about subsidiary/parent co.s ages ago, so take all this with pinch of salt.
Think it normally works like this: Subsidiary makes profit ... this profit is TAXED ... dividend payment is made to parent company. Parent company does not have to pay corporation tax on the dividend as it has already been paid by the subsidiary. I.e. for the purposes of the tax liability, the two companies are considered to be a single entity.
I imagine if the profit was transferred UNTAXED from the subsidiary to the parent, the parent would be liable to pay corporation tax on its total profit (assuming it made one) and the subsidiary's profit would just be included in this amount.
>> Edited by ATG on Thursday 17th June 19:26
Think it normally works like this: Subsidiary makes profit ... this profit is TAXED ... dividend payment is made to parent company. Parent company does not have to pay corporation tax on the dividend as it has already been paid by the subsidiary. I.e. for the purposes of the tax liability, the two companies are considered to be a single entity.
I imagine if the profit was transferred UNTAXED from the subsidiary to the parent, the parent would be liable to pay corporation tax on its total profit (assuming it made one) and the subsidiary's profit would just be included in this amount.
>> Edited by ATG on Thursday 17th June 19:26
Any movements of money between companies could be subject to scrutiny by the Inland Revenue. If Company A raises an invoice and charges Company B for "Services Rendered" or "Management Costs", then the Inland Revenue had better be assured that these costs were:
a) genuine and
b) the value of the invoice raised reflected the "arms length" worth of the service provided.
a) genuine and
b) the value of the invoice raised reflected the "arms length" worth of the service provided.
Thanks for the info everyone. Still haven't got a solution though.
When company B makes money, I want to have the option of shifting some of it to company A, with the intention of investing in other ways, instead of paying myself with it.
There must be some way of doing this, as I know there are many Group companies around. Do they all do it with management fees? Eric - do you have an idea what would be best, or is it just not going to work?
When company B makes money, I want to have the option of shifting some of it to company A, with the intention of investing in other ways, instead of paying myself with it.
There must be some way of doing this, as I know there are many Group companies around. Do they all do it with management fees? Eric - do you have an idea what would be best, or is it just not going to work?
Why does the money have to go to Company A before the investment is made? Can Company B not make the investment directly?
Management charges can be used to facilitate movement of amounts between businesses but the management work should really be done to validate the charge.
If the intention is that the money ends up in your hands personally, then the Inland Revenue will still want their pound of flesh - personal tax wise.
Management charges can be used to facilitate movement of amounts between businesses but the management work should really be done to validate the charge.
If the intention is that the money ends up in your hands personally, then the Inland Revenue will still want their pound of flesh - personal tax wise.
I know that if the money is going to me I will pay taxes however it is worked, unfortunate as that is!
The two companies do different things (obviously), so I assume that company B cannot invest in things for company A (e.g. equipment). Or maybe the money will go to company C, which, like company B, is part owned by A (I didn't mention this earlier as it starts to get complicated...). Hopefully you get the idea?
The two companies do different things (obviously), so I assume that company B cannot invest in things for company A (e.g. equipment). Or maybe the money will go to company C, which, like company B, is part owned by A (I didn't mention this earlier as it starts to get complicated...). Hopefully you get the idea?
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