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Old July 8th 05, 03:27 PM posted to uk.business.accountancy,uk.finance
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Default Merging of companies and existing debts

I and a friend wish to join forces and create a company "C". At present we
work for company "A" and "B" which we own separately.

We are both working to reduce the debts within companies A and B but it is
likely I'll be in the position where mine will take longer to pay off.

A logical way forward seems where company C is owned jointly by company A
and B. Then dividends created by company C can be used to pay off debts in
companies A and B. I assume dividends disbursed in this way from one
company to another don't attract corporation tax or do they. I hate to be
taxed twice.

When the debt in say my company A is paid off, can company A be closed, or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where two join
forces with the need to pay existing company debts off.

I would be grateful for any help.



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Old July 8th 05, 06:51 PM posted to uk.business.accountancy,uk.finance
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First recorded activity by FinanceBanter: Jul 2003
Posts: 1,485
Default Merging of companies and existing debts

On Fri, 8 Jul 2005 15:27:06 +0100, "Fred" wrote:

I and a friend wish to join forces and create a company "C". At present we
work for company "A" and "B" which we own separately.

We are both working to reduce the debts within companies A and B but it is
likely I'll be in the position where mine will take longer to pay off.

A logical way forward seems where company C is owned jointly by company A
and B. Then dividends created by company C can be used to pay off debts in
companies A and B. I assume dividends disbursed in this way from one
company to another don't attract corporation tax or do they. I hate to be
taxed twice.

When the debt in say my company A is paid off, can company A be closed, or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where two join
forces with the need to pay existing company debts off.

I would be grateful for any help.

Why mess around? What's wrong with the individual shareholders of the
new company using their dividends to pay off the debts of the other
companies?


--
Peter Saxton from London

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Old July 10th 05, 11:20 AM posted to uk.business.accountancy,uk.finance
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First recorded activity by FinanceBanter: Jul 2004
Posts: 108
Default Merging of companies and existing debts


"Peter Saxton" wrote in message
...
On Fri, 8 Jul 2005 15:27:06 +0100, "Fred" wrote:

I and a friend wish to join forces and create a company "C". At present
we
work for company "A" and "B" which we own separately.

We are both working to reduce the debts within companies A and B but it is
likely I'll be in the position where mine will take longer to pay off.

A logical way forward seems where company C is owned jointly by company A
and B. Then dividends created by company C can be used to pay off debts
in
companies A and B. I assume dividends disbursed in this way from one
company to another don't attract corporation tax or do they. I hate to be
taxed twice.

When the debt in say my company A is paid off, can company A be closed, or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where two
join
forces with the need to pay existing company debts off.

I would be grateful for any help.

Why mess around? What's wrong with the individual shareholders of the
new company using their dividends to pay off the debts of the other
companies?


--
Peter Saxton from London


Because the debts will then written off with no tax advantage. These are
debts and not share capital and hence attract no tax relief.

Should share capital be put into the company to pay off these debts?

If companies A and B continued trading then the debts could be paid in
preference to dividend and hence no corporation tax paid on these "profits".
The route you're suggesting will result on corporation tax on these
dividends.

Am I going wrong here and missing the point?


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Old July 11th 05, 06:36 AM posted to uk.business.accountancy,uk.finance
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First recorded activity by FinanceBanter: Jul 2003
Posts: 1,485
Default Merging of companies and existing debts

On Sun, 10 Jul 2005 11:20:26 +0100, "Fred" wrote:


"Peter Saxton" wrote in message
.. .
On Fri, 8 Jul 2005 15:27:06 +0100, "Fred" wrote:

I and a friend wish to join forces and create a company "C". At present
we
work for company "A" and "B" which we own separately.

We are both working to reduce the debts within companies A and B but it is
likely I'll be in the position where mine will take longer to pay off.

A logical way forward seems where company C is owned jointly by company A
and B. Then dividends created by company C can be used to pay off debts
in
companies A and B. I assume dividends disbursed in this way from one
company to another don't attract corporation tax or do they. I hate to be
taxed twice.

When the debt in say my company A is paid off, can company A be closed, or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where two
join
forces with the need to pay existing company debts off.

I would be grateful for any help.

Why mess around? What's wrong with the individual shareholders of the
new company using their dividends to pay off the debts of the other
companies?


--
Peter Saxton from London


Because the debts will then written off with no tax advantage. These are
debts and not share capital and hence attract no tax relief.

Writing debts off that are owed never gets you tax relief! Share
capital doesn't get tax relief.

Should share capital be put into the company to pay off these debts?

Why don't the shareholders lend the company the money?

If companies A and B continued trading then the debts could be paid in
preference to dividend and hence no corporation tax paid on these "profits".
The route you're suggesting will result on corporation tax on these
dividends.

A company doesn't pay corporation tax on dividends received.

Am I going wrong here and missing the point?



--
Peter Saxton from London

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Old July 11th 05, 09:17 AM posted to uk.business.accountancy,uk.finance
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First recorded activity by FinanceBanter: Jul 2004
Posts: 108
Default Merging of companies and existing debts


"Peter Saxton" wrote in message
...
A logical way forward seems where company C is owned jointly by company
A
and B. Then dividends created by company C can be used to pay off debts
in
companies A and B. I assume dividends disbursed in this way from one
company to another don't attract corporation tax or do they. I hate to
be
taxed twice.

When the debt in say my company A is paid off, can company A be closed,
or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where two
join
forces with the need to pay existing company debts off.

I would be grateful for any help.

Why mess around? What's wrong with the individual shareholders of the
new company using their dividends to pay off the debts of the other
companies?


Because the debts will then written off with no tax advantage. These are
debts and not share capital and hence attract no tax relief.

Writing debts off that are owed never gets you tax relief! Share
capital doesn't get tax relief.


It does if the shares become of neglibile value. They can either be offset
against a capital gain or against income.


Should share capital be put into the company to pay off these debts?

Why don't the shareholders lend the company the money?


The shareholders have but want to get it out in the most efficient way.
They don't want to take a dividend which is taxed.


If companies A and B continued trading then the debts could be paid in
preference to dividend and hence no corporation tax paid on these
"profits".
The route you're suggesting will result on corporation tax on these
dividends.

A company doesn't pay corporation tax on dividends received.


I assume you're suggesting that company C is owned by companies A and B.
For the (untaxed) dividend of company C to pass to company A and B. This
would be useful since company A and B have different leveles of
indebtedness.


Am I going wrong here and missing the point?



--
Peter Saxton from London





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Old July 11th 05, 09:39 AM posted to uk.business.accountancy,uk.finance
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First recorded activity by FinanceBanter: Jul 2003
Posts: 1,485
Default Merging of companies and existing debts

On Mon, 11 Jul 2005 09:17:43 +0100, "Fred" wrote:


"Peter Saxton" wrote in message
.. .
A logical way forward seems where company C is owned jointly by company
A
and B. Then dividends created by company C can be used to pay off debts
in
companies A and B. I assume dividends disbursed in this way from one
company to another don't attract corporation tax or do they. I hate to
be
taxed twice.

When the debt in say my company A is paid off, can company A be closed,
or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where two
join
forces with the need to pay existing company debts off.

I would be grateful for any help.

Why mess around? What's wrong with the individual shareholders of the
new company using their dividends to pay off the debts of the other
companies?


Because the debts will then written off with no tax advantage. These are
debts and not share capital and hence attract no tax relief.

Writing debts off that are owed never gets you tax relief! Share
capital doesn't get tax relief.


It does if the shares become of neglibile value. They can either be offset
against a capital gain or against income.


How much money are we talking about?


Should share capital be put into the company to pay off these debts?

Why don't the shareholders lend the company the money?


The shareholders have but want to get it out in the most efficient way.
They don't want to take a dividend which is taxed.


A loan isn't taxed.


If companies A and B continued trading then the debts could be paid in
preference to dividend and hence no corporation tax paid on these
"profits".
The route you're suggesting will result on corporation tax on these
dividends.

A company doesn't pay corporation tax on dividends received.


I assume you're suggesting that company C is owned by companies A and B.
For the (untaxed) dividend of company C to pass to company A and B. This
would be useful since company A and B have different leveles of
indebtedness.

That was your suggestion to begin with. I would have not bothered
unless there is some material economic advantage.


--
Peter Saxton from London

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Old July 11th 05, 09:48 AM posted to uk.business.accountancy,uk.finance
external usenet poster
 
First recorded activity by FinanceBanter: Jul 2004
Posts: 108
Default Merging of companies and existing debts


"Peter Saxton" wrote in message
...
On Mon, 11 Jul 2005 09:17:43 +0100, "Fred" wrote:


"Peter Saxton" wrote in message
. ..
A logical way forward seems where company C is owned jointly by
company
A
and B. Then dividends created by company C can be used to pay off
debts
in
companies A and B. I assume dividends disbursed in this way from one
company to another don't attract corporation tax or do they. I hate
to
be
taxed twice.

When the debt in say my company A is paid off, can company A be
closed,
or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where two
join
forces with the need to pay existing company debts off.

I would be grateful for any help.

Why mess around? What's wrong with the individual shareholders of the
new company using their dividends to pay off the debts of the other
companies?


Because the debts will then written off with no tax advantage. These
are
debts and not share capital and hence attract no tax relief.

Writing debts off that are owed never gets you tax relief! Share
capital doesn't get tax relief.


It does if the shares become of neglibile value. They can either be
offset
against a capital gain or against income.


How much money are we talking about?


Should share capital be put into the company to pay off these debts?

Why don't the shareholders lend the company the money?


The shareholders have but want to get it out in the most efficient way.
They don't want to take a dividend which is taxed.


A loan isn't taxed.


I know but money taken out as dividend is.



If companies A and B continued trading then the debts could be paid in
preference to dividend and hence no corporation tax paid on these
"profits".
The route you're suggesting will result on corporation tax on these
dividends.

A company doesn't pay corporation tax on dividends received.


I assume you're suggesting that company C is owned by companies A and B.
For the (untaxed) dividend of company C to pass to company A and B. This
would be useful since company A and B have different leveles of
indebtedness.

That was your suggestion to begin with. I would have not bothered
unless there is some material economic advantage.


--
Peter Saxton from London



I really do appreciate your help. I don't want to criticise you in any way
but I find it difficult to follow what you're trying to suggest as being the
best way forward. We are talking of around 10,000 on my part. Naturally I
would like to get this 10k back without paying any more tax than I have to.

The setup of 3 companies seems expensive from an accounting point of view,
though being small companies wouldn't need audited accounts. Hence the
question of whether it is feasible of later assigning shares from Company A
and B direct to persons (shareholders) A and B.


Many thanks for your help.


  #8   Report Post  
Old July 11th 05, 11:48 AM posted to uk.business.accountancy,uk.finance
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First recorded activity by FinanceBanter: Jul 2003
Posts: 5,228
Default Merging of companies and existing debts

Fred wrote:

"Peter Saxton" wrote
On Mon, 11 Jul 2005 09:17:43 +0100, "Fred" quoth:

Why don't the shareholders lend the company the money?

The shareholders have but want to get it out in the most efficient way.
They don't want to take a dividend which is taxed.


A loan isn't taxed.


I know but money taken out as dividend is.


But if loans have been put in, they don't have to be taken out as
dividend, simply as loan repayment.

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Old July 11th 05, 12:20 PM posted to uk.business.accountancy,uk.finance
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First recorded activity by FinanceBanter: Jul 2003
Posts: 1,485
Default Merging of companies and existing debts

On Mon, 11 Jul 2005 09:48:23 +0100, "Fred" wrote:


"Peter Saxton" wrote in message
.. .
On Mon, 11 Jul 2005 09:17:43 +0100, "Fred" wrote:


"Peter Saxton" wrote in message
...
A logical way forward seems where company C is owned jointly by
company
A
and B. Then dividends created by company C can be used to pay off
debts
in
companies A and B. I assume dividends disbursed in this way from one
company to another don't attract corporation tax or do they. I hate
to
be
taxed twice.

When the debt in say my company A is paid off, can company A be
closed,
or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where two
join
forces with the need to pay existing company debts off.

I would be grateful for any help.

Why mess around? What's wrong with the individual shareholders of the
new company using their dividends to pay off the debts of the other
companies?


Because the debts will then written off with no tax advantage. These
are
debts and not share capital and hence attract no tax relief.

Writing debts off that are owed never gets you tax relief! Share
capital doesn't get tax relief.

It does if the shares become of neglibile value. They can either be
offset
against a capital gain or against income.


How much money are we talking about?


Should share capital be put into the company to pay off these debts?

Why don't the shareholders lend the company the money?

The shareholders have but want to get it out in the most efficient way.
They don't want to take a dividend which is taxed.


A loan isn't taxed.


I know but money taken out as dividend is.

Why take it out as dividend if you lend the money to the company? Just
repay the loan.



If companies A and B continued trading then the debts could be paid in
preference to dividend and hence no corporation tax paid on these
"profits".
The route you're suggesting will result on corporation tax on these
dividends.

A company doesn't pay corporation tax on dividends received.

I assume you're suggesting that company C is owned by companies A and B.
For the (untaxed) dividend of company C to pass to company A and B. This
would be useful since company A and B have different leveles of
indebtedness.

That was your suggestion to begin with. I would have not bothered
unless there is some material economic advantage.


--
Peter Saxton from London



I really do appreciate your help. I don't want to criticise you in any way
but I find it difficult to follow what you're trying to suggest as being the
best way forward. We are talking of around 10,000 on my part. Naturally I
would like to get this 10k back without paying any more tax than I have to.

The setup of 3 companies seems expensive from an accounting point of view,
though being small companies wouldn't need audited accounts. Hence the
question of whether it is feasible of later assigning shares from Company A
and B direct to persons (shareholders) A and B.


Many thanks for your help.

Try doing the calculations and see how much tax is paid under the two
scenarios. Don't pay dividends when you can repay loans though.

It should be possible to do a simple set of calculations on a
spreadsheet and see whether it is worth the hassle.


--
Peter Saxton from London

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Old July 11th 05, 01:45 PM posted to uk.business.accountancy,uk.finance
external usenet poster
 
First recorded activity by FinanceBanter: Jul 2004
Posts: 108
Default Merging of companies and existing debts


"Peter Saxton" wrote in message
...
On Mon, 11 Jul 2005 09:48:23 +0100, "Fred" wrote:


"Peter Saxton" wrote in message
. ..
On Mon, 11 Jul 2005 09:17:43 +0100, "Fred" wrote:


"Peter Saxton" wrote in message
m...
A logical way forward seems where company C is owned jointly by
company
A
and B. Then dividends created by company C can be used to pay off
debts
in
companies A and B. I assume dividends disbursed in this way from
one
company to another don't attract corporation tax or do they. I hate
to
be
taxed twice.

When the debt in say my company A is paid off, can company A be
closed,
or
allowed to be dormant, where the 50% of shares of company C can pass
directly to me?

I assume this must be a regular occurrence in the real world where
two
join
forces with the need to pay existing company debts off.

I would be grateful for any help.

Why mess around? What's wrong with the individual shareholders of
the
new company using their dividends to pay off the debts of the other
companies?


Because the debts will then written off with no tax advantage. These
are
debts and not share capital and hence attract no tax relief.

Writing debts off that are owed never gets you tax relief! Share
capital doesn't get tax relief.

It does if the shares become of neglibile value. They can either be
offset
against a capital gain or against income.

How much money are we talking about?


Should share capital be put into the company to pay off these debts?

Why don't the shareholders lend the company the money?

The shareholders have but want to get it out in the most efficient way.
They don't want to take a dividend which is taxed.

A loan isn't taxed.


I know but money taken out as dividend is.

Why take it out as dividend if you lend the money to the company? Just
repay the loan.


Absolutely. Sorry if I haven't explained this well. The only way the loan
can be repaid is through continued trading. Hence it is essential
Comapanies A and B are seen to continue trading and making profit to pay off
the loans. I was trying to find the best mechanism for the loans to repaid
when we swtich to trading through company C. Comapny C will eventually be
owned by people A and B.



If companies A and B continued trading then the debts could be paid in
preference to dividend and hence no corporation tax paid on these
"profits".
The route you're suggesting will result on corporation tax on these
dividends.

A company doesn't pay corporation tax on dividends received.

I assume you're suggesting that company C is owned by companies A and B.
For the (untaxed) dividend of company C to pass to company A and B.
This
would be useful since company A and B have different leveles of
indebtedness.

That was your suggestion to begin with. I would have not bothered
unless there is some material economic advantage.


--
Peter Saxton from London



I really do appreciate your help. I don't want to criticise you in any
way
but I find it difficult to follow what you're trying to suggest as being
the
best way forward. We are talking of around 10,000 on my part. Naturally
I
would like to get this 10k back without paying any more tax than I have
to.

The setup of 3 companies seems expensive from an accounting point of view,
though being small companies wouldn't need audited accounts. Hence the
question of whether it is feasible of later assigning shares from Company
A
and B direct to persons (shareholders) A and B.


Many thanks for your help.

Try doing the calculations and see how much tax is paid under the two
scenarios. Don't pay dividends when you can repay loans though.

It should be possible to do a simple set of calculations on a
spreadsheet and see whether it is worth the hassle.


--
Peter Saxton from London





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