Hi all,
I saw an InvestEngine video about parking surplus company cash:
Morning 
To 2 - there is no need for a W8BEN form as all ETF’s on offer are listed in London.
I’m not an accountant, but I asked my accountant and he said any gains are taxed as profit/corporation tax and losses also count as losses (when realised).
Just as an example. I’ve been using IE for my business for the last ~6 months. I have 3 portfolios, one for VAT, one for Corp Tax and another for excess profit (profit that I don’t use to pay myself/dividends). The tax ones are both 50% CSH2 50% ERNS. The excess profit one is 100% equities like my personal ISA and SIPP.
The Tax ones I just top up to what they should be and then cash them out a week before the HMRC deadline.
The idea with the excess profit is to keep it accessible if needed, but when I’m nearer to pension age I’m going to start unloading it into my pension.
Something to be aware of is IE doesn’t allow transfers without selling the investments so for a LTD this is a major disadvantage as it triggers corp tax. I wish we had known this before using IE, we luckily only transfered a small amount and now gone elsewhere.
See In specie transfer out - #64 by mark66
Essentially for a business though, you want distributing funds as dividends are taxed at source so you do not pay tax on income received. The only tax due is if they are sold and you pay the tax as a profit on any gains in value.
@Bussabear, Matt, thank you. Your first point is important, and I am wondering what the solution is and what you went for.
What sort of dividend-distributing ETFs are good? BTW, my limited company is micro-entity (one man director).
Many thanks,
Sol
@Phlashman , Ashley thank you. It seems when you invest in bond ETFs, you need to mark them to the market value (NAV) at the year end and pay tax on unrealized gains/losses - apparently it is called some sort of loan relationship per the HMRC. For ERNS, the NAV is not likely to change much as it distributes but for CSH2 it will increase due to accumulation.
You can filter by distribution. You would have to do some research but a general diverse portfolio of income producing funds would be good so worldwide exposure and you can add some real estate, commodities etc. There is a s and p tracked global x fund, a jp morgan one, a few european indexes. Theres a good selection on IE, enough to make it diverse anyway.
And just to be clear, these income producing funds are only advantage when done via a Ltd like yourself. Historically they don’t perform so well compared to capital growth funds but thats more of an advantage via an ISA. With Ltd, you are essentially tax free as the dividends have already been taxed at source so you might want to split via ISA/Ltd to max the benefits. You should be able to get a good 4-7% income though if you diversify and they grow in value but I assume you would have no plan to sell…
Morning
Maybe these collections - Money Market Funds or Dividend Focused funds - are a good starting point?
Follow the link and they’re halfway down the page - InvestEngine’s investments
@Bussabear and @Pinch , Thank you. Indeed, looking for dividend-paying ETFs for the company. It seems they do have a higher ongoing charge versus the accumulation version. Will they be a good option if you are looking to invest for 2-3 years thru the company?
Sol
I think the question is this: Does it need to pay dividends or would an accumulation version do as well, if available? Especially if it charges less fees than the distributing version and bearing in mind that you want to hold for 2-3 years anyways?
The excellent Monevator blog has articles about accumulation vs. distribution ETF’s and the comments section of articles are also good places to read on for more information:
@Pinch, thank you. There is a tax advantage component if you invest through a company. Dividends (but not interest, which you get from bonds and bond ETFs) are not subject to corporation tax. So, ideally, you want most return via dividends and little by capital appreciation.
