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Starting a new company advice?

Hey all,

I have been considering starting my own company specialising in engineering optimisation and stock investments. A wierd combination, but it happens to be the two things I have a knack for. I do my stock investments through a private iii.co.uk account and of course haven't had any commercial engineering optimisation contracts yet. Most recently I made a tidy 10% gain in 2-3 months, on RDSB and BT. Merry Christmas for me :-). I have built up a history of profit with about 20 transactions to date and only one loss. All of the optimisation work I've done has been theoretical/"academic" to date, although I have submitted a paper to a journal for publication and am awaiting a response.

I have a couple of basic questions.

What is the benefit to me of setting up a company when, for the time being at least, I can do all the work as a private individual from home?

If I set up a company with Companies House, would I *always* be liable for tax on any money earned because even if the money is kept in offshore accounts with a trickle coming into my UK account, it must be reported in the annual company accounts (or does it?)? Or does where I do business count as well, so if my the number/address on my business card is a UK one, I'll get taxed according to UK rates regardless of where the money is kept?

Would the best way to avoid paying as much tax as possible be to register the company offshore in some tax free zone (like in Madeira or Mauritius), set up an account in a foreign bank and ask customers to make payments to that offshore account?

Presumably, there are restrictions on the operation of an offshore-registered company within the UK or indeed other countries. What are they?

Although I haven't yet hit the AEA of Capital Gains Tax with my stock investments, it is quite conceivable that I may hit it in the next accounting year as the money is compounded and if I continue to make money at my present rate. How do I minimise my tax? Could I find a foreign stock broker or is there some other way? Unfortunately at the moment I'm only aware of the UK stock market and any foreign broker I use must deal with shares on the LSE. If you're going to recommend a broker, I'd prefer it if the one recommended has a flat stock transaction fee. iii.co.uk don't charge a percentage for brokerage fees and I'm really happy with that.

For example, one idea I had to minimise the tax on profits earned on the LSE was to set up multiple stock accounts with different real people with minimal incomes (i.e. other students). Assuming all parties are trustworthy, profits are made in different people's names until they hit the AEA, and then the capital moved via cash to another account. The parties are paid a small percentage for their "assistance" in borrowing their AEA to me.

Alternatively, I could try to set up different stock accounts registered to different bank accounts and "home addresses" (I've got at least 3 - college address, rented accommodation and my parent's home). As far as the taxman is concerned, these are three different profit-generating entities and thus entitled to 3x AEA. Of course I'm not sure if this is legal or not - does the AEA apply to a person or an entity? At first I thought it applies to the person, but then when I thought about public companies with multiple "owners", I decided it had to apply to the entity.

If my total income including oddjob tutoring of students via my university's tutoring scheme and stock profits is less than the AEA, do I need to fill out an income tax return form at all? A friend of mine who is an accountant said I strictly should, but practically speaking, it isn't necessary. My university taxed me on an emergency tax code and I intend to claim the money back from Inland Revenue, not sure if this is an important detail. Just seems like all the hassle to be told I don't need to pay tax...

Sorry for all the questions. Actually if you have concise, not-to-dry references for me to read, it would be great. I don't really have a legal/accountant's head.

skate

Reply to
sk8terg1rl
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In message , sk8terg1rl writes

Can you give us indication of the scale of figures involved, the time period over which you have invested and enjoyed the profits you describe, what access you need to your funds and your anticipated frequency of transactions, i.e.: intra day. day to day, weekly, monthly etc.,

Reply to
John Boyle

Stock investments are a gamble. Most gamblers get hooked because they initially get lucky and think it will continue. It won't. If you are posting here for advice, I will give you the best you will have.... Don't give up your day job.

Reply to
norbert

The first point is that you will not be able to offset losses on share trading against income from what is probably best described as 'real' work'

Companies carrying on business X can only claim trading losses if there is a genuine buiness reason for buying the shares.

AIUI, yes this is exactly what happens.

You will find few customers prepared to do this. They will think that the person they are paying is running a tax scam and that they will get prosecuted for helping them

make less profit.

You could. Your gains will still be taxable in the UK.

Do you think that this is likely to be legal?

No point my going on really is there

tim

Reply to
tim.....

I micromanage my stocks, which means I need an online broker to be able to buy/sell pretty much instantly. In general I am happy when the stock moves by about +5% or so and sell thereafter. Like RDSB which I sold in late October took a bad hit down to £18 after Shell had to cede a controlling stake in Sakhalin.

Here's my transaction history. There are quite a few transactions in the skipped part, as well as a long break when I took a salaried job for a short while before entering university.

Buy Sainsbury's Oct 2003 @ £2.75 Sell Sainsbury's Nov 2003 @ £3.00 Buy Lloyds TSB Nov 2003 @ £4.10 Buy Shell Transport & Trading Nov 2003 @ £3.76 Sell Lloyds TSB Dec 2003 @ £4.34 Sell Shell T&T Dec 2003 @ £4.10 . . . . Buy RDSB Oct 2006 @ £17.98 Sell RDSB Oct 2006 @ £19.10 Buy United Utilities Nov 2006 @ £7.47 Sell United Utilities Nov 2006 @ £7.71 Buy BT Nov 2006 @ £2.81 Sell BT Dec 2006 @ £2.93

I'm so annoyed I sold BT too soon :-(

Reply to
sk8terg1rl

OK.

OK.

Thanks, I didn't think about that.

OK.

Maybe a bit shady by some standards, but is it illegal?

What law is broken by this? The way I see it, it is just clever "shuffling" of AEA's, there is absolutely no dishonesty involved, maybe a bit of craftiness. It is not like we're cooking the books or anything.

Reply to
sk8terg1rl

Thank you Norbert. To be honest, even though I've been making money for a while, I am still very apprehensive of spending gains made off the stock market for that very reason. It feels like I am dancing on thin ice. All it would take is a war with Iran or another 9/11 (both likely to be very unannounced yet catastropic events), and all my gains over the past few years would be wiped out for the next few years.

Hence why I am precisely planning on following your advice. Once I graduate, regardless of my earnings on the stock market, it is strictly a "side income" for me and I want my main source of income to be as a freelance "Optimiser".

I don't work well under authority as some of you might have gathered by now, and I'm a bit too mercenary to want to work for a big company and sign over profits & IP rights to them.

Reply to
sk8terg1rl

I just skimmed all the crap....but, you are way below speed to go anywhere near a company strutcher, you do not have enough money to even be of interest to anyone let alone a company...stick to sole trading until you pass the 1/4 million mark and even then dont think that a company s tructcher will be of any benifit to you.

You might like to think about a trust

Reply to
Peter Llewelln

Sorry if this sounds like a cop-out, but by far the best piece of advice I can give you is make sure you see a good accountant. I'm sure the good folks on this newsgroup will put you in mind of some of the things you'll need to discuss with the accountant and make you better prepared for the meeting, but in a situation like this there is really no substitute for good quality professional advice.

Good luck!

Adam PS I'm not an accountant.

Reply to
Adam

Yes, by a long way. You have a serious lack of understanding in this area.

There a large dose of dishonesty involved.

It may not look like it to you, but it is.

As simple question. Do you think that a company moving genuine income from one tax year to another is an OK thing to do, or a crime for which one might receive 30 years in jail.

tim

Reply to
tim.....

If this is just a "side income" can't you just put the money in an ISA to avoid tax? Probably a lot easier than starting a company.

To underline Norbert's warning, note that the FTSE100 has been rising steadily from ~3500 in 2003 to the present value of ~6200. I.e. it has almost doubled in the last four years. It's pretty easy to make money in these conditions. However if you look at the value of the FTSE100 from 2000, you see that the huge rises of the last four years still haven't made up for the huge crash where the dot com bubble burst.

Reply to
Gareth

OK, fair enough. I'll accept your statement based on your credentials. How do I get up to speed on the topic then? My knowledge is more academic than worldly which is why I try to hang out with worldly people to hope some of their wisdom rubs off :-)

It depends on how it is moved. If they say it has moved when it actually hasn't, then of course it is illegal.

I can think of a few ways around this, all of which I feel is legal. Feel free to shoot them down if you think otherwise...but please at least point out why it is wrong or how I can learn why it is wrong...

Convert the income into some valuable commodity, and send it to yourself via secure sea freight just before the accounting year is up. So you can honestly say you only have XYZ (minus the gold) assets that year.

Shortly before the accounting year is up, place a large order for expensive equipment. Cancel it before it ships or soon thereafter. You'll probably have to pay for the processing & shipping costs but it might be trivial compared to what you save on taxes.

Set up an offshore shell company and get a "raw end" of a deal by paying a grossly inflated sum for a service/item. Thus your actual company records a loss due to a financial "blunder".

Reply to
sk8terg1rl

Okay, now I'm worried. Have I done anything wrong?

The last financial year I made less than the CGT AEA. I didn't bother filling out a tax return.

In fact, I reclaimed some tax paid to Inland Revenue by some summer job where I also got wrongly taxed (the tax was based on a year's employment and not just a summer).

When the IR officer asked me if I had any other sources of income, I said no. I could have said yes (stock earnings) but since it was less than the AEA I didn't see the point of the extra hassle for nothing.

Reply to
sk8terg1rl

The ISA barely pays more interest than my current e-savings account at my bank.

Okay, fair point. But don't forget even Warren Buffet made the majority of his money after a crash some decades ago. I think if he started investing before the crash, he too like everyone else would have lost money.

Personally, I'm guessing that the seemingly inevitable war with Iran or another 9/11 will hit the markets really hard.

Reply to
sk8terg1rl

You were on firmer ground in your other post you were talking about setting up a brothel that didn't sell sex.

Any of the tax scams you have in mind will just result in the Revenue jumping on you a few years down the line, and they're not people you want to get on the wrong side of.

Reply to
Xmas

OK, that was a dumb, flippant and ill-thought out idea and I'm sorry for posting that. I just wish you guys would let that dog lie.

Exactly what laws would be broken by those activities? Where can I read stuff to get up to speed?

How come people like the Tetra Pak founder can get away without paying tax by saying he is not a UK resident while he lives here?

How the richest man in Britain avoids tax

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This is all very confusing. What is the difference between a lawful loophole and an illegal "scam"?

Reply to
sk8terg1rl

simple answer : what HMRC say it is.

Reply to
Jethro

Just remember, that you can have a whole "legal" (i.e. not prohibited) mechanisms in place, each one feeding the next. However *if* HMRC make a decision that then *whole* structure was to avoid paying tax, then you can be found guilty of tax evasion.

Other posters have said the same, but having skimmed through this thread, every time you post, I have this feeling you need to see an accountant.

I am not an accountant btw, but I have run companies

Reply to
Jethro

"Jethro" wrote

Don't be silly. HMRC have been shown (in court) to be wrong, too!

Reply to
Tim

That's the complicated answer !

Reply to
Jethro

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