Great article. Can I please clarify one of the statements: “If you’re closing your company via MVL and fall foul of the moneyboxing legislation, then you’ll be paying tax as income not as capital gains on your company profits. A big hit.”

My understanding from tax advisors is that this is considered for the applicability of ER / BADR which drives whether the capital distribution is taxed as 10% or 20%. However you seem to refer to it as a TAAR decision (i.e. whether the distribution is considered income or capital). Are you considering this as part of Condition D? i.e. It is reasonable to assume that the main purpose, or one of the main purposes, of the winding up was the avoidance or reduction of a charge to income tax.

The commercial reasons for winding up seem to be critical to this.

Could you please clarify?

Thanks Gareth

Hi Steve, you cannot just transfer it as the transaction will act as either disposal or a loan. In either case, it’ll sit on the trading company balance sheet. So you can either sell, pay the CT and then move it all or just hold them in two companies.

What you’re describing for determining the company trading status is actually the asset base of the company, not the income. In any case, HMRC says that for a company to have a trading status the company should not have any substantial non-trading activity. The 20% rule depends on a few factors such as asset base, income, time spent and expenses. See here for more details about the meaning of substantial. Hope that helps https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64090

I operate a ltd company trading in retail, and this year I started to purchase crypto investments monthly through it (directly, not a second ltd). Do you know if I formed a second one now, if I am able to just go and transfer the crypto purchased thus far straight over to it, so it is out of my trading company’s way and so then all set up clean in the second only?

Second:
Is the 20% rule based on revenue, not just income? For example, if the business is turning over say 20-30k per month in revenue, and £500 a month was from that was used to purchase Ethererum (dollar cost average monthly method), Is that sufficient to prove the main activity of the company is still trading, not investing?

Thank you.

relative to a distribution in specie upon liquidation; is the company liable to CT on the appreciated assets (valued at the market value I would assume); e.g. if the co. bought shares that doubled in value, would CT apply, as in a “chargeable gain”, upon realisation of the assets (which is a step of the liquidation process) – even though no actual selling would be involved? yet in other terms, would a liquidation distribution be considered as a chargeable disposal? Haven’t found anything so far online. . Maybe too obvious?!

subtlety no.1: the asset to distribute in kind would be bitcoin
subtlety no.2: the shareholder would not necessarily be a tax resident in the UK at the time of the liquidation => would it mean that the distributed assets would not be subject to UK CGT/ER tax (but instead to tax in the country of tax residence), provided the distributed assets are viewed as capital instead of income/dividends?

Hi Renata, you can purchase land abroad through a LTD company. Just be careful of the double-taxation agreement between the 2 countries and speak to a local tax expert as well as a UK one.

I am not an expert in this area, so not sure how it works on company land. I would expect the personal property would have to pay some ground-rent on market rates (or whatever the property on land pays) to the company or otherwise be considered BIK but not sure.

Transferring ownership can get expensive. For example, paying stamp duty twice, and perhaps corporation tax on the house appreciation when realised so yeah, looks like you are doing the research before proceeding which is good.

I’ve not hit the limit with Starling when paying my taxes etc on payments so they must have improved it, and lots of other bits much improved versus two years ago and didn’t want to take a risk on something like Tide which isn’t FSCS protected. EToro was successful in the end, so I would recommend this route as there are fewer forms to fill in versus the others and lower fees from what I can glean.

Interesting! I see. A limitation of Starling, (at least 2 years ago), was that the bank transfer limit was £10k per day, not sure if that’s changed now. Let us know how it goes!

I hear you regarding Interactive Investor. Another option is Interactive Brokers if you don’t mind the more trading-like interface. Their mobile app is much better though. Was your eToro application successful in the end?

I managed to get round it with Starling by changing the SIC code (to one you reference in another article) through the web filing route for a small fee and the application is now being considered. However it has revealed that many institutions don’t really have a name for what this is, so categorising it is difficult (while staying honest) Hopefully this is because nobody does it, not because it’s not worth doing :) eToro definitely the easier route for starting a company stocks and shares account than interactive investor btw, but you do have to contact them to help set it up.

Thanks for your kind words, Robin. Very good point. A few other people have mentioned the difficulty of opening a business bank account for investing, and not just in the holding company scenario. A number of high-street banks have suspended the opening of new business accounts due to covid, but they’re also afraid of “risky stocks”. I still struggle to understand why that is, assuming you don’t need to borrow any money from them. HSBC used to open holding co accounts, now they suspended all business accounts.

Judging from previous experience, if you mention but-to-let and have an associate SIC code, even the intention to purchase in the future makes things easier. It somehow feels more ‘safe’ to them. Please keep us posted if you manage to get around that during these tough times.